Mobikwik vs Paytm: Comparing Key Performance Before MobiKwik IPO

SUMMARY

India’s Fintech sector has a promising road ahead. Amid this, Mobikwik, a leading payment platform, is ready to float its IPO to raise ₹572 crore, which will kick off for subscription from December 11. Here's a comparison of Mobikwik with its well-known listed peer, Paytm on key performance indicators.

Mobikwik vs Paytm: Comparing Key Performance Before MobiKwik IPO

Gurugram-based One Mobikwik Systems has launched its initial public offering (IPO), with bids opening on Wednesday, December 11 to December 13. The price band is in the range of ₹265-279 per share. The IPO is an entirely fresh issue with plans to raise ₹572 crore.

Incorporated in 2009, One Mobikwik Systems (Mobikwik) is a fintech platform with a two-sided payments network consisting of consumers and merchants. It provides services like utility bill payments, online/offline purchases, money transfers, UPI payments, and others. It also operates a B2B payment gateway, Zaakpay, and has received RBI approval for its Payment Aggregator (PA) business.

Key competitors include Phonepe, Paytm, Airtel Payments Bank and Freecharge, and Amazon Pay across payments, lending, and investment segments. However, One 97 Communications Ltd (Paytm) is the major listed competitor of MobiKwik. It is India's leading digital ecosystem for consumers as well as merchants, offering payment services, commerce and cloud services, and financial services. It has built the largest payments platform in India and operates a two-sided ecosystem.

Industry Overview

India’s fintech sector has emerged as a transformative force in democratizing financial services aided by favorable government policies and significant investments of $31 billion over the past decade. According to Non- Executive Chairman of the National Payments Corporation of India the fintech sector is valued at $110 billion in 2024 and is projected to grow to $420 billion by 2029 at a CAGR of 31%.

The government's push towards a digital economy, coupled with a young and tech-savvy population, is likely to take the fintech sector to new heights. However, the challenge for Fintech players is adhering to regulatory and legal norms and continuously adapting to the latest technology, determining their long run.

Let's compare two major players: Mobikwik vs Paytm

The IPO objectives of Mobikwik focus on funding growth in financial and payment services, technology advancement, and payment device capital expenditure. Comparing it with Paytm’s issue three years ago, Paytm prioritizes expanding its ecosystem of customers and merchants and investing in new business ventures.

Mobikwik and Paytm: Financial Performance Overview

MobiKwik has recently reached a significant milestone by reporting its first-ever full-year profitability for FY24. The company, operating at a loss for 15 years, recorded a Profit After Tax (PAT) of ₹14.08 crore, a remarkable turnaround from the ₹83.81 crore loss it reported in FY23. Revenue from operations also saw a substantial rise, reaching ₹875 crore in FY24 compared to ₹540 crore in FY23.

Whereas, during FY24 Paytm’s revenue from operations increased 25% YoY to ₹9,978 crore in FY24. Overall loss for FY24 fell by ₹354 crore YoY to ₹1,423 crore, on the back of improved growth and increased operational profitability.

During FY24, Paytm delivered a higher contribution margin of 56% versus Mobikwik’s 37.25%. However, Mobikwik reported lower employee cost of 13.03% against Paytm’s 31% and a positive EBITDA margin of 4.18% against Paytm’s negative 3.61%. Mobikwik's balance sheet is more leveraged with a debt-equity ratio of 0.73x against Paytm’s 0.01x.

(Source: Chittorgarh.com and Screener.in)

MobiKwik post issue P/E ratio is negative at 86.7x, but it has a better return on net worth of 8.66% compared to Paytm’s (-) 10.70%. The valuation of fintech through traditional approaches of P/E multiples may not represent a fair valuation as these fintech companies' cash flows are negative, their business model evolves rapidly due to changing technology and has negligible physical assets.

India’s fintech sector is a high-growth sector and investing in such a fast-growing sector with rapid technology change comes with a high risk and high reward scenario. While evaluating the fintech sector, investors must exercise caution and look for companies with a strong compliance record, low debt, and innovative business models addressing the market needs.

Mobikwik is much smaller in size than Paytm but is a promising player through its innovation and offerings, and it has become profitable.

Top player by registered wallet users as of March 2024:

(Source - Mobikwik’s RHP)

Comparison of key performance Indicators for FY24:

(Source - Mobikwik’s RHP)

Conclusion

India’s fintech sector outlook is optimistic, driven by innovation, a young and talented workforce, and the government’s supportive policies, attracting large investors' interest. Mobikwik is likely to benefit from the sector’s growth potential, being smaller than Paytm in scale its focus on technology and profitability has solidified its position in the sector.

Disclaimer:

This article is only for educational purposes. We do not recommend any particular stock, securities and strategies for trading. The securities quoted are exemplary and are not recommendatory. The stock names mentioned in this article are purely for showing how to do analysis. Take your own decision before trading and investing.