Forensic Analyst, Trudence Capital Advisors

Nitin Mangal

Forensic Analyst

Trudence Capital Advisors

Trudence Capital Advisors Private Limited is a SEBI-registered Research Analyst, holding SEBI registration number INH000015747. Our firm is dedicated to providing independent and unbiased research on Indian mid to large-cap companies. Trudence Capital is known for its counter-consensus views, with a focus on forensic research and on-ground primary investigations. Our research approach is thorough, involving detailed analysis of accounting practices and governance, alongside extensive channel checks.

Independent & Unbiased Research

Equity Capital Markets

One Mobikwik Systems / Equity Capital Markets

It is not surprising to see a fresh IPO filing of a new-age tech, internet platform company every week. In this insight, we talk about another fintech payments company, <a href="https://www.smartkarma.com/entities/one-mobikwik-systems-ltd" target="_blank" data-smartkarma-citation="entities:33952:1" rel="noopener">One Mobikwik Systems (1235487D IN)</a> (Mobikwik) who is one of the nearest competitors to <a href="https://www.smartkarma.com/entities/paytm-mobile-solutions-pvt-ltd" target="_blank" data-smartkarma-citation="entities:26149:1" rel="noopener">Paytm (PAYTM IN)</a> . While Paytm is an entire universe in itself; Mobikwik's services have a narrower sphere albeit still varied to some extent in terms of product offerings.Mobikwik was incorporated in 2008, and since then it has established itself as one of the pure-play payments company, justified by the consumer payments segment contributing nearly 80% to the consolidated GMV and 72.5% to the consolidated topline. Consumer payments consists merchant fee when users transacts via MobiKwik Wallet, and certain convenience fees.The wallet segment contributes heavily to the topline for the company but it also has a lot of competitors. Hence, Mobikwik's key differentiating product becomes the BNPL segment (Buy now pay later) which was launched not a long time ago, and can be a potential game changer for the company. BNPL is effectively a credit product given to its users by lending partners via Mobikwik platform. BNPL includes short term 15-day cycle product which is interest fee (Zip), along with EMI products for a longer tenure having an interest component (Zip EMI).Mobikwik, in order to generate an additional source of revenue via leveraging, also offers payment gateway services i.e. Zaakpay to its merchants in return for a fee. Mobikwik may have a diverse stream of payments and credit revenue, but it, however, suffers from a plethora of discomforts. The company has a negative net worth (Ind AS) since F19 and has a very poor visibility of any profits in the short-mid term, although it has reported positive segment-wise results. Moreover, operations were seriously affected in F21 and they don't seem to be a stand-out, especially when other competitors like Paytm are lurking around. The balance sheet issues extend to incorrect treatment and some puzzling line items. Final nail in the coffin is seen in the form of several regulatory and legal issues, which can put Mobikwik in a fix.

It is not surprising to see a fresh IPO filing of a new-age tech, internet platform company every week. In this insight, we talk about another fintech payments company, One Mobikwik Systems (1235487D IN) (Mobikwik) who is one of the nearest competitors to Paytm (PAYTM IN) . While Paytm is an entire universe in itself; Mobikwik's services have a narrower sphere albeit still varied to some extent in terms of product offerings.Mobikwik was incorporated in 2008, and since then it has established itself as one of the pure-play payments company, justified by the consumer payments segment contributing nearly 80% to the consolidated GMV and 72.5% to the consolidated topline. Consumer payments consists merchant fee when users transacts via MobiKwik Wallet, and certain convenience fees.The wallet segment contributes heavily to the topline for the company but it also has a lot of competitors. Hence, Mobikwik's key differentiating product becomes the BNPL segment (Buy now pay later) which was launched not a long time ago, and can be a potential game changer for the company. BNPL is effectively a credit product given to its users by lending partners via Mobikwik platform. BNPL includes short term 15-day cycle product which is interest fee (Zip), along with EMI products for a longer tenure having an interest component (Zip EMI).Mobikwik, in order to generate an additional source of revenue via leveraging, also offers payment gateway services i.e. Zaakpay to its merchants in return for a fee. Mobikwik may have a diverse stream of payments and credit revenue, but it, however, suffers from a plethora of discomforts. The company has a negative net worth (Ind AS) since F19 and has a very poor visibility of any profits in the short-mid term, although it has reported positive segment-wise results. Moreover, operations were seriously affected in F21 and they don't seem to be a stand-out, especially when other competitors like Paytm are lurking around. The balance sheet issues extend to incorrect treatment and some puzzling line items. Final nail in the coffin is seen in the form of several regulatory and legal issues, which can put Mobikwik in a fix.

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<a href="https://www.smartkarma.com/entities/policybazaar-insurance-web-aggregator" target="_blank" data-smartkarma-citation="entities:33470:1" rel="noopener">Policybazaar Insurance Web Aggregator (1569999D IN)</a>/PB Fintech operates the Policybazaar and Paisabazaar platforms in India. Policybazaar is India’s largest digital insurance marketplace with a 93.4% market share based on the number of policies sold in FY20, according to Frost &amp; Sullivan. Paisabazaar is India’s largest digital consumer credit marketplace with a 51.4% market share, based on disbursals in FY20, according to Frost &amp; Sullivan. PB Fintech’s shareholders include SoftBank Vision Fund, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, Tiger Global and <a href="https://www.smartkarma.com/entities/info-edge-india-ltd" target="_blank" data-smartkarma-citation="entities:14461:1" rel="noopener">Info Edge India (INFOE IN)</a>.   PB Fintech is looking to raise Rs60.2 billion ($809 million) at an $5 billion valuation, according to press reports. The IPO comprises a primary raise of Rs37.5 billion and a secondary raise of Rs22.7 million. PB Fintech is also considering a pre-IPO placement of Rs7.5 billion in new shares. The pre-IPO placement amount will be deducted from the primary portion of the raise. India has a highly underpenetrated insurance market due to financial illiteracy, lack of awareness of insurance, low household disposable income, complex products and inefficiencies in distribution system. Insurance penetration (premium as % of GDP) is at 3.8% in India as compared to the global average of 7.2%. However, online distribution channels are changing the insurance distribution landscape in India. A key enabler of online distribution are digital insurance marketplaces which account for 54% of the total online insurance market in FY20, according to Frost &amp; Sullivan. Policybazaar, which is India’s largest digital consumer credit marketplace, is a direct play on the rising insurance penetration rates in India. <a href="https://www.smartkarma.com/entities/paytm-mobile-solutions-pvt-ltd" target="_blank" data-smartkarma-citation="entities:26149:1" rel="noopener">Paytm (PAYTM IN)</a>, which also has an insurance marketplace amongst its various offerings, offers an alternative but less direct exposure to the Indian insurance market. We discussed the Paytm IPO in <a href="https://www.smartkarma.com/insights/paytm-ipo-initiation-a-payments-led-super-app" target="_blank" data-smartkarma-citation="insights:54983" rel="noopener">Paytm IPO Initiation: A Payments-Led Super-App</a>. <div class="content-highlight">PB Fintech operates an asset-light capital model and does not underwrite any insurance or retain any credit risk on loans. Due to its market-leading platforms, the business is well positioned to benefit from the post-COVID-19 recovery in insurance policies sales and loan disbursals by its partners. In July 2021, PB Fintech obtained an insurance brokerage license will allow Policybazaar to broaden its consumer reach through the offline channel. Helped by strong brand recognition and retention rates, the favourable unit economics also suggest that profitability is within reach. Overall, we think that PB Fintech has attractive fundamentals.</div>

Policybazaar Insurance Web Aggregator (1569999D IN)/PB Fintech operates the Policybazaar and Paisabazaar platforms in India. Policybazaar is India’s largest digital insurance marketplace with a 93.4% market share based on the number of policies sold in FY20, according to Frost &amp; Sullivan. Paisabazaar is India’s largest digital consumer credit marketplace with a 51.4% market share, based on disbursals in FY20, according to Frost &amp; Sullivan. PB Fintech’s shareholders include SoftBank Vision Fund, Tencent (700 HK), Tiger Global and Info Edge India (INFOE IN).   PB Fintech is looking to raise Rs60.2 billion ($809 million) at an $5 billion valuation, according to press reports. The IPO comprises a primary raise of Rs37.5 billion and a secondary raise of Rs22.7 million. PB Fintech is also considering a pre-IPO placement of Rs7.5 billion in new shares. The pre-IPO placement amount will be deducted from the primary portion of the raise. India has a highly underpenetrated insurance market due to financial illiteracy, lack of awareness of insurance, low household disposable income, complex products and inefficiencies in distribution system. Insurance penetration (premium as % of GDP) is at 3.8% in India as compared to the global average of 7.2%. However, online distribution channels are changing the insurance distribution landscape in India. A key enabler of online distribution are digital insurance marketplaces which account for 54% of the total online insurance market in FY20, according to Frost &amp; Sullivan. Policybazaar, which is India’s largest digital consumer credit marketplace, is a direct play on the rising insurance penetration rates in India. Paytm (PAYTM IN), which also has an insurance marketplace amongst its various offerings, offers an alternative but less direct exposure to the Indian insurance market. We discussed the Paytm IPO in Paytm IPO Initiation: A Payments-Led Super-App. PB Fintech operates an asset-light capital model and does not underwrite any insurance or retain any credit risk on loans. Due to its market-leading platforms, the business is well positioned to benefit from the post-COVID-19 recovery in insurance policies sales and loan disbursals by its partners. In July 2021, PB Fintech obtained an insurance brokerage license will allow Policybazaar to broaden its consumer reach through the offline channel. Helped by strong brand recognition and retention rates, the favourable unit economics also suggest that profitability is within reach. Overall, we think that PB Fintech has attractive fundamentals.

PB Fintech (Policybazaar) IPO Initiation: Insurance Policy

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/angel-broking-ltd" target="_blank" data-smartkarma-citation="entities:33510:1" rel="noopener">Angel Broking (ANGELBRK IN)</a>'s stock has risen &gt;4x over the last four months on the back of strong growth in the digital broking industry in India. However, we think the stupendous growth of &gt;17x in Angel's active client base over the past couple of years may not sustain. While the shift to digital and discount broking is inevitable, the recent growth seems to be temporary and will likely reverse led by high customer churn. Cyclicality and heightened competition in the sector will further adversely impact the fundamentals and lead to de-rating of the stock once the euphoria in the sector subsides. The market is also pricing in high optimism around Angel's potential to be a fintech platform. We again differ here based on our insights into Angel's customer base, competitive scenario and nascent track record of Angel in the quasi-passive quant-based asset management and wealth management space.

Angel Broking (ANGELBRK IN)'s stock has risen &gt;4x over the last four months on the back of strong growth in the digital broking industry in India. However, we think the stupendous growth of &gt;17x in Angel's active client base over the past couple of years may not sustain. While the shift to digital and discount broking is inevitable, the recent growth seems to be temporary and will likely reverse led by high customer churn. Cyclicality and heightened competition in the sector will further adversely impact the fundamentals and lead to de-rating of the stock once the euphoria in the sector subsides. The market is also pricing in high optimism around Angel's potential to be a fintech platform. We again differ here based on our insights into Angel's customer base, competitive scenario and nascent track record of Angel in the quasi-passive quant-based asset management and wealth management space.  

Angel Broking: Riding the Digital Broking Wave in India, But It May Slip

Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

India’s largest payment and financial services platform <a href="https://www.smartkarma.com/entities/paytm-mobile-solutions-pvt-ltd" target="_blank" data-smartkarma-citation="entities:26149:1" rel="noopener">Paytm (PAYTM IN)</a>  has filed for an IPO to raise about INR166bn (US$2.2bn) through the issuance of new shares as well as through the sale of existing shares. Paytm plans to raise about INR83bn through the sale of new shares while the existing shareholders including the company’s founder Mr. Vijay Shekhar Sharma and other investors plan to offer part of their shareholding in the company.According to news media outlets, Paytm aims for a valuation of about US$25-30bn and the company’s FY03/2021 revenues of INR28bn (US$364m) implies a trailing EV/Sales of 69-82x.Paytm’s revenues grew 1.5% YoY in FY03/2020 while it declined 14.6% YoY in FY03/2021 due to the pandemic. We expect the company’s commerce and cloud services business’s top line to further decline in FY03/2022E due to the resurgence of Covid-19 in India in April 2021. Though Paytm has multiple monetisation channels and established itself as a category leader in overall payments sector in India, we believe it will take a few more years for the company to reach profits.In this insight, we examine Paytm’s business model, segments, revenues and margins. In a follow-up insight, we plan to take a look at the corporate governance related issues of the company and run through our governance framework.

India’s largest payment and financial services platform Paytm (PAYTM IN)  has filed for an IPO to raise about INR166bn (US$2.2bn) through the issuance of new shares as well as through the sale of existing shares. Paytm plans to raise about INR83bn through the sale of new shares while the existing shareholders including the company’s founder Mr. Vijay Shekhar Sharma and other investors plan to offer part of their shareholding in the company.According to news media outlets, Paytm aims for a valuation of about US$25-30bn and the company’s FY03/2021 revenues of INR28bn (US$364m) implies a trailing EV/Sales of 69-82x.Paytm’s revenues grew 1.5% YoY in FY03/2020 while it declined 14.6% YoY in FY03/2021 due to the pandemic. We expect the company’s commerce and cloud services business’s top line to further decline in FY03/2022E due to the resurgence of Covid-19 in India in April 2021. Though Paytm has multiple monetisation channels and established itself as a category leader in overall payments sector in India, we believe it will take a few more years for the company to reach profits.In this insight, we examine Paytm’s business model, segments, revenues and margins. In a follow-up insight, we plan to take a look at the corporate governance related issues of the company and run through our governance framework.

Paytm IPO: Multiple Revenue Channels but Profitability Is a Tall Order

<a href="https://www.smartkarma.com/entities/paytm-mobile-solutions-pvt-ltd" target="_blank" data-smartkarma-citation="entities:26149:1" rel="noopener">Paytm (PAYTM IN)</a>, formally known as One97 Communications, is India’s largest payments platform based on the number of consumers, number of merchants, number of transactions and revenue as of 31 March 2021, according to RedSeer. Paytm has an overall payments transaction volume market share of 40%, and wallet payments transaction market share of 65-70% in India as of FY21, according to RedSeer. Paytm’s shareholders include <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a> (29.6% of outstanding shares), Softbank Vision Fund (18.3%), <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> (7.2%) and <a href="https://www.smartkarma.com/entities/berkshire-hathaway-inc-cl-b" target="_blank" data-smartkarma-citation="entities:8635:1" rel="noopener">Berkshire Hathaway Inc Cl B (BRK/B US)</a> (2.8%).  Paytm plans to raise up to Rs166.0 billion ($2.2 billion) with a primary/secondary split of 50%/50%, according to the DHRP filing. The Indian Government is highly supportive of digital payments and in 2016, introduced demonetisation efforts through the launch of Unified Payment Interface (UPI) to reduce the reliance on cash. However, India continues to be a cash-driven economy which underscores the opportunity. Due to government initiatives, improving technology, growing awareness, digital payments by value in India are expected to more than double from $20 trillion in FY21 to $40-50 trillion by FY26, according to RedSeer. <div class="content-highlight">As India’s largest payments platform, Paytm is well placed to benefit from this structural tailwind. The advent of UPI has increased competition (Google Pay, PhonePe, MobiKwik) but Paytm is also leveraging its dominance in digital payments to build a synergistic ecosystem of complementary services, resulting in a strong claim to the “super-app” tag. While the COVID-19 pandemic was disruptive particularly to the non-payments business, Paytm should return to growth as the impact of the pandemic wanes and vaccination rates rise in India. Overall, we think that Paytm's fundamentals are attractive. </div>

Paytm (PAYTM IN), formally known as One97 Communications, is India’s largest payments platform based on the number of consumers, number of merchants, number of transactions and revenue as of 31 March 2021, according to RedSeer. Paytm has an overall payments transaction volume market share of 40%, and wallet payments transaction market share of 65-70% in India as of FY21, according to RedSeer. Paytm’s shareholders include Ant Financial Services Group (6688 HK) (29.6% of outstanding shares), Softbank Vision Fund (18.3%), Alibaba Group (BABA US) (7.2%) and Berkshire Hathaway Inc Cl B (BRK/B US) (2.8%).  Paytm plans to raise up to Rs166.0 billion ($2.2 billion) with a primary/secondary split of 50%/50%, according to the DHRP filing. The Indian Government is highly supportive of digital payments and in 2016, introduced demonetisation efforts through the launch of Unified Payment Interface (UPI) to reduce the reliance on cash. However, India continues to be a cash-driven economy which underscores the opportunity. Due to government initiatives, improving technology, growing awareness, digital payments by value in India are expected to more than double from $20 trillion in FY21 to $40-50 trillion by FY26, according to RedSeer. As India’s largest payments platform, Paytm is well placed to benefit from this structural tailwind. The advent of UPI has increased competition (Google Pay, PhonePe, MobiKwik) but Paytm is also leveraging its dominance in digital payments to build a synergistic ecosystem of complementary services, resulting in a strong claim to the “super-app” tag. While the COVID-19 pandemic was disruptive particularly to the non-payments business, Paytm should return to growth as the impact of the pandemic wanes and vaccination rates rise in India. Overall, we think that Paytm's fundamentals are attractive. 

Paytm IPO Initiation: A Payments-Led Super-App

India

One 97 Communications Limited provides payment solutions. The Company provides online services such as hotel booking, top ups, data processing, games, mobile content, and bill payments. One 97 Communications Limited serves customers worldwide.

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Paytm (PAYTM IN)

Mobikwik IPO: Secure Enough?

Mobikwik has a diverse stream of payments and credit revenue, but it also suffers from a range of discomforts such as poor balance sheet health,...

Nitin Mangal

PB Fintech (Policybazaar) IPO Initiation: Insurance Policy

PB Fintech (operates Policybazaar and Paisabazaar platforms) is looking to raise Rs60.2 billion ($809 million) through an IPO in India. Overall, we...

Arun George

Angel Broking: Riding the Digital Broking Wave in India, But It May Slip

Angel's stock has risen 4x in the last four months on the back of rise in digital broking in India. However, aggressive customer acquisition...

Ankit Agrawal, CFA

Paytm IPO: Multiple Revenue Channels but Profitability Is a Tall Order

Though Paytm has multiple monetisation channels and established itself as a category leader in overall payments sector in India, it will take a few...

Shifara Samsudeen, FCMA, CGMA

Paytm IPO Initiation: A Payments-Led Super-App

Paytm plans to raise up to Rs166.0 billion ($2.2 billion) with a primary/secondary split of 50%/50%, according to the DHRP filing. Overall, we...

Arun George

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