MobiKwik's Lending Ambitions: A Double-Edged Sword?
MobiKwik's recent financial performance has been a rollercoaster, with a mix of positive and negative indicators. On the one hand, the company has turned EBITDA positive and reported a net profit, showing signs of operational recovery. On the other hand, payments revenue has stagnated, raising questions about the company's future direction.
The crux of the matter lies in MobiKwik's evolving business model. The company is transitioning from a payments intermediary to a regulated lending and merchant finance platform. This shift is evident in their acquisition of an NBFC license and the focus on financial services.
However, this transition is not without challenges. The legacy payments business is weakening, and the company is facing top-of-the-funnel threats. The reliance on UPI transactions, which have a low take rate, is a significant concern. As UPI users move towards wallets, bill payments, and lending, the company's monetisation strategy needs to adapt.
The company's CFO, Upasana Taku, acknowledges the challenge, stating that the company is no longer treating UPI as a standalone monetisable product. Instead, UPI is being used as a customer acquisition and engagement tool for downstream products like lending and merchant payments. This shift in strategy is necessary but may take time to bear fruit.
One of the bright spots is the expansion of payments gross margin. Lower gateway costs and user incentives have contributed to a significant increase in gross margin. However, the scope for further cost reductions is limited, and the take rate is already under pressure.
The financial services segment, primarily the lending business, has shown impressive growth. Gross margins have improved, and the share of Super Prime borrowers has increased. Delinquency trends have improved, and repeat borrower contributions have risen. However, the GMV has declined, and the lending volumes are not growing in absolute terms.
The NBFC license is a significant development, giving MobiKwik a competitive edge in the Indian fintech space. By participating in lending economics directly, the company can improve monetisation over time. However, this also changes the company's risk profile, requiring capital access, underwriting discipline, and sustainable balance-sheet management.
In conclusion, MobiKwik's lending ambitions are a double-edged sword. While they offer a competitive advantage and the potential for improved monetisation, they also bring new challenges. The company must navigate the transition carefully, ensuring that the payments business is not left behind while building a robust lending platform. The next few years will be crucial in determining MobiKwik's success in reinventing itself as a broader credit-led fintech platform.
