Following in the footsteps of its competitors, Gurgaon-based mobile wallet firm MobiKwik has partnered non-banking financial company Bajaj Finance Ltd to offer financial services to consumers. On Wednesday, the NBFC acquired close to 11% in the wallet company for $35.4 million, at a valuation of $327 million. That is a far cry from the $1-billion valuation MobiKwik had been seeking in its recent fund-raising attempts. But its co-founder Upasana Taku, who calls MobiKwik a "sustainability and profitability-oriented" company, is undeterred. In an interview with VCCircle, she talks about the deal with Bajaj Finance, the competition and why it would be a mistake to peg MobiKwik's valuation to just this one transaction. Excerpts:
Could you tell us more about the deal with Bajaj Finance?
It's not just about money; money is incidental. For the past few months, we had been thinking about entering financial services and making MobiKwik more than just an app for everyday payments—an app that doubles up as a credit card, which gets you loans and even buys you insurance.
All these services are available at banks, but they have a physical set-up. For a home or personal loan, you have to fill out hundreds of documents.
We were keen to seize this opportunity and opted for a partnership with Bajaj Finance as they are the biggest consumer-lending company in India. The group also has a presence in insurance. Their focus has always been on brick-and-mortar stores, and our focus has been on digital, mobile and payments. It is the perfect match.
All top wallet players have more or less turned into financial services firms. Paytm recently pivoted to a payments bank, FreeCharge has been bought by Axis Bank, and now MobiKwik gets into a strategic deal with Bajaj Finance. Is there a trend?
It's different strokes. For FreeCharge, it was just about finding a home. And home could have been an Internet firm, a bank or any company for that matter. It's great it has worked out for them. It also gives Axis Bank a lot of heft in competing with HDFC Bank and ICICI Bank.
Paytm's payments bank is a smaller step, as all you can do with a payments bank licence is payments and deposits up to Rs 1 lakh. You can't do insurance and lending.
We believe ours is the best strategy. We will enable all these products and services via our partnership, without having to become a bank or dealing with all the regulatory stuff.
But why did you go for a non-banking financial company and not a bank?
Have you seen the speed at which banks operate? If I want to build a digital platform for 300 million Indians and, to do that, I either become a bank or forge a joint venture with one, it will be very tough. You need a swift, aggressive company to create that kind of disruption.
Bajaj is a credible name and a segment leader. It is the top player in consumer lending, and second in general and life insurance.
Banks move like banks. Otherwise, there's no reason why India's largest private banks should be the country's largest payments companies.
You were said to be in talks for the past six months to raise $100 million at a valuation of $1 billion (Rs 6,400 crore). But the deal with Bajaj Finance values MobiKwik at Rs 2,077 crore ($327 million).
Compared to our last round, this is a significantly higher valuation. Of the $100-150 million we want to raise, this is a very small amount.
There's more to come. You can't peg all the numbers to this deal. We will announce more deals soon.
Can you tell us about the other investors you are talking to for this round?
I can't reveal names, but we intend to bring in large financial investors. That is something we are working on.
What's your strategy to compete with Axis Bank, which has no dearth of capital, and Paytm, which is backed by the heavy-pocketed SoftBank?
We don't worry about competition. So far, including this deal, we have raised around $110 million. Two-and-a-half years ago, our closest competitor [Paytm] had raised $550-600 million. Despite the relatively small amount of funding we have raised, we have given them strong competition. FreeCharge's fate is no secret.
We are not doing 10 different businesses, so we don't splurge money. We have a lean team of 300-400 employees, and are focused on generating a fatter top-line, getting more users and retailers, and profitability. Our agenda is very different.
As you move towards financial services, will the wallet take a back seat?
Our main engagement with the user is via the app, which is built around the wallet. Going ahead, you will also have Bajaj EMI card and Bajaj credit card as part of the app. It will also show you places where you can pay using the Bajaj EMI card and buy products.
This is how we are expanding the envelope. The app is not just limited to a mobile wallet now. It will have money from your bank account, money that you get from your employer as reimbursement, etc. And all of those data points will help us give the user better insurance products.
We are looking to launch our lending product in a month's time.
Will you still be chasing the $1-billion valuation in your next round?
It's a good goal to have, but we are not really a valuation-driven company. Our competitors are valuation-driven; we are more sustainability and profitability-oriented.
Earlier, we were looking to be profitable by early next year. However, because of demonetisation, we had to invest more. Now, our target is to be profitable latest by the end of 2018.
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