MobiKwik IPO oversubscribed 120x with ₹166 GMP, while Vishal Mega Mart IPO saw 27x demand with ₹20 GMP

As of December 17, 2024, two prominent Indian companies, MobiKwik and Vishal Mega Mart, have recently concluded their initial public offerings (IPOs), attracting significant investor interest. Both companies are set to debut on the stock exchanges on December 18, 2024. This analysis provides a detailed comparison of their IPO performances, business models, financial health, and market prospects to assist potential investors in making informed decisions.

MobiKwik IPO Overview

MobiKwik, a leading digital wallet and online payment services provider, launched its IPO from December 11 to 13, 2024, offering 20.5 million equity shares priced between ₹265 and ₹279 per share. The company aimed to raise approximately ₹572 crore at the upper price band. The IPO was met with overwhelming demand, receiving bids worth about $4.7 billion, indicating a subscription rate of approximately 120 times the shares on offer. Retail investors showed particularly strong interest, with their portion oversubscribed by 135 times, while institutional buyers placed bids at 120 times their allotted shares.

Vishal Mega Mart IPO Overview

Vishal Mega Mart, a prominent budget retailer in India, conducted its IPO during the same period, offering 1.025 billion equity shares priced between ₹74 and ₹78 per share, aiming to raise up to ₹8,000 crore. The offering was entirely an offer for sale by existing shareholders, with no new shares issued. The IPO garnered bids worth $19 billion, with the issue subscribed over 27 times. Institutional investors subscribed around 81 times the shares reserved for them, while the retail portion was subscribed 2.3 times.

Grey Market Premium (GMP) Analysis

The Grey Market Premium (GMP) serves as an indicator of investor sentiment ahead of official listings. As of December 17, 2024, MobiKwik’s shares command a GMP of ₹166, suggesting a potential listing price of around ₹445 per share, which represents a premium of approximately 59% over the upper IPO price band. In contrast, Vishal Mega Mart’s shares have a GMP of ₹20, indicating a potential listing price of around ₹98 per share, a 26% premium over the upper IPO price band.

Business Models and Market Positioning

MobiKwik: Established as a digital wallet and payment services provider, MobiKwik has diversified its offerings to include credit and investment products. The company boasts extensive reach, covering 99% of India’s pin codes, and competes with major players like Paytm, PhonePe, and Google Pay in India’s rapidly expanding online payments market. The increasing adoption of digital payments in India positions MobiKwik favorably for sustained growth.

Vishal Mega Mart: As a budget retailer, Vishal Mega Mart offers affordable groceries and apparel, primarily targeting consumers in smaller cities and towns. With 70% of its stores located in these areas, the company is relatively insulated from competition posed by quick-commerce companies prevalent in larger urban centers. Vishal Mega Mart competes with entities like Reliance Retail, DMart, and Tata Group’s Star Bazaar in India’s $600 billion grocery and supermarket industry.

Financial Performance and Growth Prospects

MobiKwik: The fintech sector in India is experiencing robust growth, with the transaction value for the market projected to more than double to ₹593 trillion by the fiscal year 2028-29 from ₹265 trillion in 2023-24. MobiKwik’s extensive user base and diversified services position it to capitalize on this expansion. However, the company faces intense competition from well-established players, necessitating continuous innovation and customer acquisition strategies.

Vishal Mega Mart: The company’s focus on budget-conscious consumers in smaller cities has enabled it to maintain steady growth, even amid economic fluctuations. Its debt-free status and robust financial health make it an attractive investment for those seeking exposure to India’s retail sector. However, the retail industry is susceptible to factors like inflation and changing consumer preferences, which could impact future performance.

Investor Considerations

Risk Appetite: Investors with a higher risk tolerance and interest in the fintech sector’s growth may find MobiKwik appealing, given its significant GMP and the booming digital payments market. Conversely, those seeking a more stable investment might consider Vishal Mega Mart, which operates in the relatively steady retail sector and has demonstrated consistent performance.

Market Dynamics: The fintech industry is characterized by rapid technological advancements and regulatory changes, which could affect MobiKwik’s operations. In contrast, the retail sector, while competitive, is more established, potentially offering more predictable returns for Vishal Mega Mart investors.

Valuation and Growth Potential: MobiKwik’s IPO valuation aimed at approximately $256 million, reflecting its growth potential in the expanding fintech market. Vishal Mega Mart’s valuation, based on the IPO price band, is around ₹36,120 crore, indicating its substantial presence in the retail sector.

Conclusion

Both MobiKwik and Vishal Mega Mart present compelling investment opportunities, each with distinct advantages and associated risks. MobiKwik offers exposure to India’s rapidly growing fintech sector, with the potential for substantial returns, as indicated by its high GMP. However, it operates in a highly competitive and evolving market. Vishal Mega Mart provides a more traditional investment in the retail sector, with steady growth prospects and a moderate GMP, suggesting reasonable listing gains.

Investors should align their choices with their individual investment goals, risk tolerance, and market outlook. Conducting thorough due diligence and consulting with financial advisors is recommended before making investment decisions