The Indian fintech landscape is undergoing significant changes, fueled by rapid digital adoption and an evolving regulatory framework. The Reserve Bank of India has emphasised the need for stricter oversight in the unsecured loans sector, while Finance Minister Nirmala Sitharaman has called for improved digital infrastructure. These government initiatives aim to strengthen consumer protection and encourage innovation.
In a recent interview, Upasana Taku, Co-founder and CFO of MobiKwik delves into the company’s journey to profitability and growth trajectory. She openly discussed the distinctive strategic shifts in their business model, outlines plans for the post-IPO phase, and highlights key trends shaping the fintech landscape in India. Additionally, she addresses the increasing regulatory scrutiny in the sector and provides insights into the current sentiment among investors and the prevailing market conditions.
As per recent estimates, the Indian fintech market is projected to reach USD 111.14 billion in 2024 and expand to USD 421.48 billion by 2029. The industry has seen substantial growth in recent years, positioning India as an emerging hub for fintech startups.
One of the players of the sector, Mobikwik recently completed its 15 years of existence with hitting a significant milestone by turning profitable. It recorded a profit after tax of Rs 14 crore and a total income of over Rs 890 crore, which is a 58.67 per cent growth from last year.
Reflecting on the early days, Co-founder and CFO, Taku notes that for the first four years, MobiKwik was profitable, bootstrapped with personal savings by her and her co-founder. "We needed to generate revenue early on to hire more employees and grow the business," she explains. As the company scaled, securing a coveted wallet license from the Reserve Bank of India enabled them to raise growth capital and expand their user base, which now stands at 160 million.
She attributes MobiKwik's journey to its platform model. "The payment sector is inherently low-margin and it takes time to achieve the scale necessary to turn a profit," she explains while stressing on what took it so long to reach profitability mark. The company now has 4.3 million merchants on board and as users transact for everyday needs through the app, MobiKwik generates revenue akin to credit card fees.
On Upcoming Rs 700 Cr IPO
After initially filing for an IPO in 2021 with a target of Rs 1,900 crore, MobiKwik has now revised its plans with a new Rs 700 crore filing in 2024. “This change in issue sise is not a reduction in expectations but a strategic response to our strong financial growth over the past few years,” Taku states, emphasising the confidence behind this decision. While the initial target included Rs 1,500 crore for growth capital and Rs 400 crore for an offer for sale, the company’s current shareholders have opted to retain their stakes. “This reflects our increased confidence in MobiKwik’s performance,” she remarks.
Since 2021, MobiKwik has tripled its revenue from Rs 300 crore to Rs 890 crore and achieved positive EBITDA of Rs 37 crore. “We have surpassed our previous goals without the need for external capital,” Taku highlights. The current capital raise of Rs 700 crore aligns with MobiKwik’s scaled-up financial position and future growth targets, focusing on reaching a top-line revenue of around Rs 5,000 crore in the next few years. “Our disciplined approach to capital deployment mirrors traditional growth strategies that build strong foundations for long-term expansion,” Taku explains.
Strategic Pivots
In 2017, MobiKwik pivoted towards offering higher-margin financial products to better serve its users, especially those in underserved markets in Tier II and III cities. This shift resulted in a two-pronged approach, enhancing user experience by providing comprehensive financial services and improving revenue through these higher-margin offerings. MobiKwik launched its first financial product in 2018, steadily adding more offerings and now features a dedicated financial services section in its app.
Looking to the future, Upasana emphasises the potential for growth in the fintech market, especially in tier two and three cities, where 75 per cent of MobiKwik’s users reside. “We started 15 years ago, initially serving the digitally savvy urban crowd—about 25 per cent of our 160 million users come from metro areas. They are well served by banks but use MobiKwik for convenience, not necessity.”
Taku further highlights, “ 75 per cent of our users come from tier two and tier three cities, using MobiKwik out of necessity for payments and bill settlements, as their financial institutions do not meet their needs. Our focus is now on these smaller towns, where most of our new users and merchants are coming from.”
Demographic Dynamics
The discussion moves to MobiKwik’s recent user growth and product mix. Upasana notes that of the Rs 890 crore revenue reported last year, payments and financial services each contribute around 50 per cent. While specific product-level revenue percentages are not disclosed, MobiKwik’s offerings within payments and financial services cover multiple subcategories, including credit, wealth management, and insurance.
With 160 million users and a target market of 400-450 million digital users, MobiKwik sees significant growth potential as more Indians adopt digital payments over the next five years. Similarly, the company is focused on expanding its merchant network to reach a larger portion of India’s 40-50 million merchants, projected to grow to around 85-90 million.
In The Ring With Giants
In a competitive landscape dominated by heavyweights like Paytm and PhonePe, Taku remains optimistic about carving out MobiKwik’s niche. “Despite raising the least capital compared to our competitors, we have seen consistent growth—59 per cent this year alone,” she asserts. The company differentiates itself by creating unique products that resonate with users, which not only attracts them but also enhances profitability.
She explains company’s strategy, particularly within the Unified Payments Interface (UPI) segment. Despite competing with well-capitalised firms like Google Pay, PhonePe and Amason Pay, MobiKwik has managed to grow its user base to 160 million while raising only Rs 1200 crore (approximately $150 million)—a fraction of the capital raised by its competitors.
Aditionally, she highlights MobiKwik’s recent growth in market share within India’s digital payments sector, claims to be the largest wallet player, where market share doubled from 11 per cent in March to 24 per cent in August 2024. “So we have more than doubled our market share, as per RBI data on wallets. We are definitely scaling up much more on payments. That will continue to be the foundation,” she states.
Expansion In Product Offerings
MobiKwik has consistently enhanced its product offerings to cater to diverse consumer needs, emphasising access to credit in everyday transactions. In 2018-19, the company introduced a credit distribution product that allowed users to shop with available credit lines, filling a gap that other UPI-based competitors hadn't addressed.
The company's model relies on partnerships with banks and NBFCs as lenders, while MobiKwik simplifies the product for its users. Taku notes, “We strive to offer solutions that are not widely available from other providers,” highlighting the flexibility that appeals particularly to India's self-employed population, whose income streams are irregular and dependent on seasonal demand.
One of MobiKwik’s fastest-growing offerings this year is the Pocket UPI feature, which allows users to make payments via their wallet across any UPI QR code. “This feature not only streamlines users’ bank statements but also minimises the frequency of bank PIN entries,” Taku explains, emphasising the dual benefit of improved budgeting control and enhanced security.
With interoperability introduced in 2024, wallets like MobiKwik’s now work seamlessly on the UPI network. “We are excited to amplify both safety and convenience for our users, increasing the wallet’s reach beyond its own merchant network,” she adds.
Evolving Regulatory Environment
While speaking on increasing regulatory scrutiny in fintech sector, Taku says, “India is a well-regulated market for financial services, and fintech is also very well regulated. Unlike other markets where regulations come after an industry explosion, India has had regulations in place from day one, evolving with market dynamics." For instance, when the RBI mandated a shift from lightweight KYC to full KYC for wallet providers in 2017, Taku reflects, “We faced temporary disruptions, but our resilience ensured we adapted quickly to the new, more rigorous process.”
Current Market Sentiment And Investors’ Interest
In discussing the current landscape of IPOs, Taku highlights the resurgence of Indian capital markets, stating, “It’s a great opportunity for technology companies to come to the public market.” She notes that the market has been performing robustly, making it an attractive environment for companies to seek public listings.
Reflecting on the previous year's market dynamics, she remarks, “In terms of the valuations, of course, 2021 was a more frothy market... frankly, a little unrealistic.” This year, however, Taku observed a more balanced scenario: “The valuations are reasonable, which means that companies that deserve premiums are getting the premiums, and those that shouldn’t have been getting such premiums are getting the right pricing.” This shift is seen as positive for technology firms looking to capitalise on public markets.
Indian fintech companies experienced a 59 per cent drop in funding during the first half of 2024, raising USD 795 million compared to USD 1.93 billion in the same period of 2023. Sequentially, funding also declined by 11 per cent from USD 896.7 million in the second half of 2023, according to an industry report released in July this year.
Notably, the environment saw green shoots in the latter half, as predicted by industry leaders and investors. The Indian fintech ecosystem is rebounding after a prolonged funding winter, with a remarkable 66 per cent year-on-year growth in funding, reaching USD 778 million in the third quarter of 2024 (Q3CY24), up from USD 471 million in Q3CY23, according to a recent report. This marks a significant recovery, as funding more than doubled quarter-on-quarter from USD 293 million in Q2CY24.
Taku expresses optimism for the future of consumer internet companies in India, suggesting that the landscape could transform significantly. “I can foresee that right now there are a handful of listed consumer internet companies in India. In the next few years, we should have at least 100 listed companies from the consumer internet background,” she predicts, emphasising the potential for growth in this sector.
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