One Mobikwik Systems Limited IPO is one of the most awaited offerings of 2024, with a price band set at ₹265 to ₹279 per equity share. The IPO consists of a fresh issue of 205.01 lakh shares, amounting to ₹572.00 crores. This marks a significant step in MobiKwik's journey as it aims to expand its financial services, which include digital credit, payments, and investments for both consumers and merchants.

The subscription period for this IPO will run from December 11, 2024, to December 13, 2024, with the allotment expected to be finalized on December 16, 2024. The shares will be listed on the BSE and NSE with a tentative listing date set for December 18, 2024. The IPO market capitalization of One Mobikwik Systems Limited at the upper price band of ₹279 per share is estimated at ₹2,167.44 crores.

The lot size of the IPO is 53 shares, requiring retail investors to invest a minimum of ₹14,787. High-Net-Worth Individuals (HNIs) must invest in a minimum of 14 lots, totaling ₹2,07,018. This price range and lot size suggest the company is targeting both retail investors and HNIs, who are keen on investing in a tech-first financial company with a strong foothold in the Indian market.

The Grey Market Premium (GMP) of One Mobikwik Systems Limited IPO as of December 13, 2024, stands at ₹78, reflecting an expected listing gain of 27.95%. It’s important to note that while GMP provides an indication of investor sentiment, it doesn’t guarantee actual market performance once the shares are listed on exchanges. The Grey Market Premium is based on demand and supply in an unregulated market, and no real price discovery can be done before the listing.

As of December 13, 2024, the IPO has been subscribed 119.38 times, signaling strong demand among investors. This high demand could result in substantial listing gains for investors. The IPO has also successfully raised ₹257.40 crores from anchor investors at ₹279 per share, confirming the market confidence in One Mobikwik Systems Limited.

In terms of financials, One Mobikwik Systems has shown significant growth in its revenues over the last few years. For the fiscal year 2024, the company posted revenues of ₹8,903.15 million, up from ₹5,611.16 million in FY23. The EBITDA for FY24 stood at ₹372.20 million, indicating a positive growth trajectory. The company has also reduced its losses, with a profit after tax of ₹140.79 million for FY24, compared to losses in the previous two years.

The pre-issue P/E ratio for the IPO is 117.23x, and the post-issue P/E ratio stands at 153.95x, which is significantly higher than the industry average of 34x. This suggests that the IPO is priced at a premium relative to industry peers. The company’s return on capital employed (ROCE) for FY24 is 9.28%, and return on equity (ROE) is 9.22%, which is reasonable but may not justify the high P/E ratio for long-term investors.

The objectives of the One Mobikwik Systems IPO are primarily focused on funding the organic growth of its businesses. The company plans to utilize ₹1,500 million for growing its financial services business, ₹1,350 million for expanding its payment services, and ₹1,070 million for research and development in data science, machine learning, and artificial intelligence. These strategic initiatives aim to solidify MobiKwik’s position as a leader in the digital banking and financial technology space.

While the GMP suggests a strong listing gain, the high P/E ratio and pricing indicate that the IPO is fully priced. For those seeking a long-term investment, the company's future growth in India’s rapidly expanding financial sector makes it a potential opportunity, although with some caution given the high valuation.

Given the financial performance and the valuation, our recommendation for investors is to avoid the One Mobikwik Systems Limited IPO for both listing gains and long-term investments at this time.

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