The Gurugram-based company had
filed its draft IPO papers for a Rs 1,900 crore IPO in July, which was approved by market regulator Securities and Exchange Board of India (Sebi) in October. It was aiming to launch the offering before Diwali day of November 4.
Sources aware of the discussions said the fintech firm has been advised to not go ahead with its IPO as it may be hard to find enough demand from institutional investors–foreign and domestic.
‘Valuation Down by 30-40%’
“The IPO valuation has come down by as much as 30-40%,” people cited above said.
The disappointing public listing by Paytm has led to further corrections in fintech valuations among investors.
“There isn’t enough support from foreign institutional investors for the issue and the company is seeing a cut in its valuation currently,” a person aware of the matter said.
Responding to ET’s email query on the developments, a representative for MobiKwik said the company had received regulatory approvals for its IPO and will go public at ‘an appropriate time’.
The company did not provide any further details.
On Monday, shares of PB Fintech, which runs Policybazaar and Paisabazaar, also ended 6.60% lower on BSE at Rs 1,243.10.
Abu Dhabi Investment Authority (ADIA) put $20 million in MobiKwik giving it a valuation of $700-$750 million. The startup has been aiming to list at a valuation of at least $1 billion. Based on current conversations, it is being ascribed a much lower valuation for the public offering, which existing investors are not in favour of, people aware of the details said.
“The demand for anchor book was lacklustre from both foreign and domestic institutional investors, and as a result, the public issues had to be postponed” said one of the people aware of the development.
Anchor investors are allotted shares before the IPO at a fixed price. This is an indicator of the demand and popularity of the IPO.
One banker in the know said that the MobiKwik IPO could be delayed by a few months as the company will have to update its September quarter earnings. “As per the rules, audited accounts should not be more than 135 days old from the date of the quarter ending,” he added.
The company had also kept a window or pre-IPO placement of shares for worth up to Rs 400 crore but there is no clarity if that will come through in the coming weeks.
In contrast to consumer internet firms such as Nykaa and Zomato that have received a stellar response from public market investors, fintech companies are facing scepticism over their ability to generate revenue and eventually turn profitable by selling financial services products to their existing user base.
For the year ended March 31, 2021, MobiKwik’s total income was down 18% to Rs 302.2 crore while losses widened to Rs 111.3 crore, the draft red herring prospectus (DRHP) showed. The firm reported a loss of Rs 84.6 crore and Rs 141.8 crore, respectively, in FY20 and FY19.
Earlier this year, MobiKwik’s user database was also reportedly breached but the company had denied it at the time. The banking regulator RBI had ordered a probe into the matter.
Subsequent reports indicate that the company has submitted a forensic report about the breach to the RBI.
MobiKwik was conducting over one million daily transactions across its network, including on its digital wallet, UPI and bill payment services, at the time of filing the DRHP, according to industry estimates.
The fintech firm specialises as an online wallet service for payments, cross-selling financial services products such as loans and insurance through tie-ups with financial services firms. The company recently became an aggregator of mutual funds and small-ticket credit services. MobiKwik has said previously that it has over three million merchants on its network and serves over 107 million users.
According to the draft red herring prospectus (DRHP), MobiKwik founders Bipin Preet Singh and Upasana Taku plan to sell shares worth over Rs 191 crore in the secondary sale. Together, they own more than 34% in the company.
MobiKwik has so far raised over $165 million, according to startup data platform Crunchbase. This includes equity and debt funding.
Founded in 2009 by Singh and Taku, MobiKwik counts Sequoia Capital India, Bajaj Finance, American Express, Cisco and Abu Dhabi Investment Authority among its investors. Bennett, Coleman and Company Ltd has a 1.08% stake in the startup. BCCL is the parent company of The Times of India Group, which also publishes The Economic Times.