MobiKwik IPO Risk Factors — From increased competition, negative cash flow to slowing growth – CNBC TV18
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The IPO consists entirely of a fresh issue, with no offer-for-sale component. The issue will open on December 11 and close on December 13.
MobiKwik is seeking a valuation of around $250 million through the proposed listing—a significant discount compared to its private valuation of $924 million in 2021, according to Tracxn data.
The company has highlighted several risk factors in its RHP, including intense competition, utilisation of net proceeds, reliance on third parties, and others.
Here is a look at some of those risk factors:
Increased competition: MobiKwik faces substantial and growing competition in the fintech industry. Failure to compete effectively could materially and adversely affect its business, financial condition, operations, and prospects.
Regulatory oversight: The company’s operations are regulated and inspected by the RBI. Adverse observations, proceedings, or notices from the RBI could impact its operations.
Net proceeds utilisation
: The company’s funding requirements and the deployment of net proceeds are based on management estimates and assumptions, which have not been appraised by any independent agency. Changes in circumstances could affect the intended use of these proceeds, potentially leading to lower-than-expected revenues or profits.
Security risks: Security breaches or attacks on the platform, as well as potential failures to protect personal, confidential, and proprietary information, could harm the company’s reputation and adversely affect its operations and financial health.
Slow user growth: A slowdown in the growth of active users could negatively impact business performance.
Compliance: Non-compliance with restrictive covenants in financing agreements could lead to the suspension of further drawdowns, adversely affecting the company’s operations and financial position.
Third-Party reliance: The company depends on third parties for products and services. Any disruption or interference in these services could harm its operations, financial condition, and cash flows.
Financial performance: MobiKwik incurred losses of ₹128 crore and ₹83.8 crore in FY22 and FY23, respectively. While it reported a profit of ₹14 crore in FY24, it incurred a loss of ₹6.6 crore in the three months ending June 30, 2024. The company also had negative retained earnings as of March 31, 2024. Sustaining profitability in the future may be challenging.
Rising capital costs: An increase in the cost of capital could reduce the attractiveness of its Digital Credit offerings. Similarly, higher interest rates could impact the appeal of its Xtra product.
Negative cash flows: The company has experienced negative cash flows from operating activities in the past and may face similar challenges in the future.
