IPO-bound MobiKwik is planning to expand its financial services offerings to small businesses in tier-2 and tier-3 cities as part of its strategy to focus on growth in the merchant segment, as it recorded its first full-year profit in 2023-24, a
The fintech company clocked a net profit of about ₹14 crore in FY24, the first since its inception in 2009, following a loss of ₹83.8 crore in the previous financial year. Total income grew nearly 59% to ₹890.32 crore in FY24.
As it attempts to maintain its growth momentum, MobiKwik is now working on making more financial products and services available to merchants of small businesses, Upasana Taku, co-founder and CFO of MobiKwik, told Mint in an interview.
“We want to create more value for our users, particularly for smaller merchants and small businesses in towns and cities across India. Our goal is to bring all the financial products they need directly to them, through the MobiKwik app,” she added.
MobiKwik, which started experimenting with the merchant lending business a year ago offering credit services like Merchant Cash Advance, currently provides payments products like online checkout, QR (quick response) codes , soundbox, EDC (electronic data capture) machine, and payment gateway services through Zaakpay.
Taku said that the company will soon look at extending its investing, savings and insurance products, currently available to retail customers, to merchants as well. It also plans to expand its existing working capital loans and credit services for such small-business owners through its app.
“We are committed to continually expanding and scaling these offerings on our platform, within the limits of regulations and while managing all the risks associated with running a large fintech platform,” she added.
Earlier in June, Taku had also told Mint that the company has scaled up its acquisition of small merchants, hiring teams and contract workers in tier-2 and 3 cities, as it plans to boost lending to this segment.
The company has also improved its revenue growth rate from a mere 3.3% last year, when a delay in a potential payment aggregator licence from RBI impacted business through its wholly owned subsidiary Zaakpay.
“We did not receive the licence from the regulator in the first round. In FY22, there was more than a hundred crore of revenue coming from the payment gateway business. In FY23, that ₹140 crore is missing. The business has grown 3% without this payment gateway revenue,” said Taku.
RBI, in October 2023, gave approval to Zaakpay to operate as a payment aggregator and onboard new merchants.
Taku added that over the last three years, the company has seen about 3x growth in income while also turning profitable.
To be sure, the company has also been on a path to profitability over the last few years. MobiKwik had reduced its losses last financial year by about 35%. In fact, the company clocked a profit after tax of ₹8 crore for the first half of FY24, Mint reported in October last year.
In the year ended 31 March, the company managed to scale and become profitable, even as its operating expenses rose. In FY24, MobiKwik’s payment gateway charges, lending operations and financial guarantee expenses together rose by 51% to ₹505 crore from ₹335 crore in the previous fiscal.
“Our contribution margins have increased from 40.34% in FY23 to 43.32% in FY24. This along with reduction in (percentage of fixed costs to revenue) fixed costs from 50.31% in FY23 to 39.14% in FY24, has led to sharp increase in both Ebitda profitability and PAT profitability in FY24,” the company said.
The company’s fixed costs, which include both employee benefit expenses and other costs like advertising expenses, meanwhile, also grew by about 23% in FY24 to ₹349 crore.
Founded in 2009 by wife and husband duo Taku and Bipin Preet Singh, MobiKwik is a mobile wallet and financial services company. Through its payments business that makes up about 36% of revenue, it allows retail customers and merchants to send and receive money, and pay various utility bills.
It also offers digital credit, investments, and insurance products such as MobiKwik ZIP--its Buy Now Pay Later (BNPL) credit, and ZIP EMI that provide personal loans, merchant cash advances, wealth management, and insurance distribution. This segment makes up 64% of MobiKwik’s revenue.
The company’s payments business has boomed over the last few months amid a regulatory crackdown on competitors like Paytm, and with the regulator allowing wallet interoperability over UPI, Mint earlier reported.
On the credit business, Taku said, “We have improved our risk analytics to better understand and predict user credit behavior, identifying who is likely to pay on time and who is not. Our collection processes are also much stronger. We've taken a measured approach in upgrading our users' credit products. For example, users who were given smaller ticket loans in 2021 or 2022 and repaid them on time have now qualified for higher ticket and longer tenure products,” said Taku.
Taku said that as a result, both the payments and financial services businesses have turned profitable on standalone levels.
One MobiKwik Systems Ltd, MobiKwik’s parent entity, in January filed its draft papers with the Securities Exchange Board of India (Sebi) to raise ₹700 crore in an initial public offering.
The company, which is making a second attempt at the bourses with a reduced offer size, is waiting for Sebi's approval.
“We are at the top of the queue, according to the Sebi website. We are looking at this very keenly and carefully, and hoping that we receive the approval soon,” said Taku.
MobiKwik had initially filed for a public listing in late 2021. It had received a regulatory nod then, but did not proceed with the IPO.
Also read | Mobikwik files for ₹700 cr IPO
