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Bajaj Finance buys 10.83% in Mobikwik for $35M; Credit wallet

Mobile wallet company Mobikwik has sold 10.83% stake for Rs 225 crores (approximately $35.34 million at current rates) to Bajaj Finance, as a part of a strategic deal between the companies, that allows Mobikwik to bring in credit facilities to a wallet business.

Bajaj Finance has picked up 10 Equity shares and 271,050 compulsory convertible preference shares, which will amount to 10.83% of the company on a fully diluted basis. The transaction is expected to close in 30 days. At $35.34 million for 10.83%, this values Mobikwik at around $326 million. In June, Mobikwik had said it was raising $100 million at a billion dollar valuation.

According to the filing, Mobikwik’s revenues:

  • FY14: Rs 5.07 crores
  • FY15: Rs 13.97 crores
  • FY16: Rs 38.07 crores

Mobikwik data from MediaNama’s Digital Payments in India report, from March 2017 (hence subject to change):

  • 55 million wallet users
  • 3 million daily transactions
  • Rs 500 ticket size of transaction (range for mobile recharges)
  • 7-10 times, a user used Mobikwik wallet in a month
  • 1.5 million merchant base
  • 1.4 million total offline merchant base

What Bajaj Finance will bring to the deal

In June, Mobikwik co-founder Upasana Taku had said that the investors (which will a part of the $100 million round) will include “one major strategic investor, and a number of financial institutions.” Bajaj Finance looks like both.

The deal allows Mobikwik to offer credit facilities on its wallet service: Bajaj Finance Ltd will extend credit facilities to Mobikwik users, allowing instant purchases and payment option.

Note that in October last year, MobiKwik had started offering loans in partnership with a number of non-banking financial companies (NBFCs), through a company called CashCare. At that time, the lending business had two options: An EMI model and a loan model. The EMI model could have been used for purchases such as laptops and mobile phones on online websites which support MobiKwik, while the loan model could be used for any purpose. The loan was based on a credit score developed in-house, and underwrote some of the purchases. That might have served as a useful proof of concept for Bajaj Finance.

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Bank?

A statement in the press release deserves particular attention. In it, Mobikwik co-founder and CEO Bipin Preet Singh says “In short Mobikwik transforms itself as a new-age bank where our digital transactions will lead to lowering of lending rates and increased supply of money in the Indian economy”.

While this partnership doesn’t quite make it a bank, it wouldn’t want to remain a wallet.

Remember that Mobikwik is a wallet in a bank dominated market right now:

  • All banks can launch wallets but all wallets can’t launch banks: the RBI has significant restrictions, and Mobikwik was among the wallets that wasn’t given a Payments Bank license. The RBI gave no specific reason for its selection of banks, and Mobikwik competitor Paytm was the only one to get it.
  • Banks are on UPI while wallets aren’t, because the banks don’t want them there.
  • The RBI has been criticising the lack of Know Your Customer norms for wallets, and there’s a regulatory consultation which makes things difficult for wallets. Read: Eight challenges wallets will face with RBI’s draft guidelines.

Also read: RBI dangles wallet interoperability but prescribes tougher norms for companies

 

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Written By

Founder @ MediaNama. TED Fellow. Asia21 Fellow @ Asia Society. Co-founder SaveTheInternet.in and Internet Freedom Foundation. Advisory board @ CyberBRICS

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

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