MOS Utility
MOS Utility is coming out with a 100% book building; initial public offering (IPO) of 65,74,400 shares of Rs 10 each in a price band Rs 72-76 per equity share.
The issue will open for subscription on March 31, 2023 and will close on April 6, 2023.
The shares will be listed on NSE Emerge Platform.
The face value of the share is Rs 10 and is priced 7.20 times of its face value on the lower side and 7.60 times on the higher side.
Book running lead manager to the issue is Unistone Capital.
Compliance Officer for the issue is Mansi Bhatt.
Profile of the company
The company is a technology enabled provider of digital products and services in the B2C, B2B and financial technology arena through an integrated business model via its online portal i.e. www.biz-solutionz.com. It provides business opportunities for shopkeepers, retailers, students, housewives, professionals, insurance agents to start their own futuristic online e-commerce business with an intention to promote government’s “Vocal for Local” campaign. The company organizes its business under seven primary business segments, (i) banking, (ii) travel, (iii) insurance, (iv) utility services, (v) entertainment services, (vi) franchisee and (vii) other services.
It focuses on the convergence of financial exchange channels, processes and are a comprehensive platform, where it aims to serve its customers’ needs, bringing together the advantages of B2B, B2C and B2B2C models within a single platform. The company’s diversified exchange platform allows it to harness synergies and provides cross-selling and upselling opportunities to both consumers and businesses.
The company has a “phygital” strategy (i.e. physical and digital) that combines over 1,68,018 network partners which includes agents, distributors and master distributors for payment solutions, remittance, utility, travel and insurance products etc. throughout PAN India as of September 30, 2022, with a digital online platform for its offerings. This results in a business model which is intended to provide a smooth customer experience regardless of product, service or location. The company’s network size and diversity, converging front-end distribution channels with back-end technology function provides it with a competitive edge.
Proceed is being used for:
Meeting the working capital requirements
General corporate purposes
Meeting the offer expenses
Industry overview
The Indian government launched the ‘Digital India’ initiative to improve online infrastructure and increase internet accessibility among citizens (for example, linking rural areas to high-speed internet networks); thereby, empowering the country to become more digitally advanced. The government’s increased focus to create a digitally empowered economy is forecast to benefit all sectors, wherein core digital sectors such as information technology & business process management, digital communication services and electronics manufacturing are likely to double their GDPs to $355-435 billion by 2025. In a report by McKinsey, it highlighted that the ‘Digital India’ initiative is expected to boost the country’s digital economy to $1 trillion by 2025.
Digital payments have grown sharply in the past few years and the payments industry in India. The pandemic gave a strong boost to the Indian digital payments industry and increasingly more users are switching to digital modes every day. With the fintech industry gaining a solid footing in the Indian market, more innovative and better payments modes will hit the market in the future. The industry will bring more safety and efficiency into digital transactions. India is already adopting blockchain technology. Machine Learning, Artificial Intelligence, and cloud-based payment facilities, as well as cryptocurrency, are slowly being recognized. As part of aggressively working towards achieving a digital economy, the government of India has launched various initiatives to promote the use of digital payments. The DigiDhan, Di initiative, Cashless India are some of the schemes launched with the aim of accelerating digitalization. In anticipation of growth in the adoption of cryptocurrencies, the Indian government, in its recent budget, announced the acceptance of cryptocurrency, with a solid tax regime in place. Furthermore, for the proper regulation of alternate currencies, the government plans to launch its own digital currency, named central bank digital currency (CBDC), which would add more impetus.
As part of aggressively working towards achieving a digital economy, the government of India has launched various initiatives to promote the use of digital payments. The DigiDhan, Di initiative, Cashless India are some of the schemes launched with the aim of accelerating digitalization. In anticipation of growth in the adoption of cryptocurrencies, the Indian government, in its recent budget, announced the acceptance of cryptocurrency, with a solid tax regime in place. Furthermore, for the proper regulation of alternate currencies, the government plans to launch its own digital currency, named central bank digital currency (CBDC), which would add more impetus. India’s digital payments market is expected to expand to $1 trillion by 2023. By 2025, India’s digital payment industry is projected to grow to more than 300% of its current size.
Pros and strengths
Integrated business model offering one-stop-shop for B2B, B2C and B2B2C: The company provides its products and services through an integrated business model via its online portal i.e. www.bizsolutionz.com, encompassing its seven primary business segments (being banking, travel, insurance, utility services, entertainment services, franchisee and other services). With the necessary required permissions in place, it focuses on the convergence of its business segments. It serves its customers, by bringing together the advantages of B2B, B2C and B2B2C models within its platform. The company’s range of products and services also complement each other, leading to cross-selling and upselling opportunities and synergies.
Diversified product portfolio: The company has a diversified range of products and services ranging from banking, travel, insurance, utility services, entertainment services, franchisee and other services. The company’s diversified product portfolio and customer base aligned with increasing market demand is a key component of its growth and success. This reduces its dependence on a single product or services and also enables it to reduce its exposure to sectorspecific declines, local or regional economic downturns, disruptions from political circumstances and/or natural disaster.
Wide reach for customer acquisition: The company’s ability to bring together the advantages of B2B, B2C and B2B2C models within its platform, along with its digital capabilities, provide many touch points for the consumer and its network partners, ensuring a level of stickiness. This, coupled with its range of digital products and services that complement each other, results in multiple cross-selling and upselling opportunities, synergies, network effects and wide reach for customer acquisition. Due to its ability to cross-sell various complementary products and services, it typically has low marketing and business promotion expenses and thus, improved opportunities for profitability and unit economics metrics.
Risks and concerns
Major revenue from operation is from fees and commission-based activities: The primary drivers of the company’s topline are the fees and commissions from various products and services, and the volume achieved of such fees and commissions. The fees and commissions it receives can depend upon a number of factors that are, in part, within its control, which can include its overall business strategy, its expenses related to a particular transaction type, the volume of transactions for a product or service (where the greater the number of expected transactions will typically result in it setting a smaller fee or commission, and vice versa), or promotions that it may be running at any given time. Further, they are also dependent upon a number of external factors, which can include general macro-economic conditions, the market value of certain infrastructure, the supply or demand for a product and service, regulatory instructions, competitive factors with certain other fintech companies, Financial Institutions and other companies within certain product/service lines. Competitive factors in particular, have and may continue to have an adverse effect on its ability to charge higher fees and commissions to improve its margins.
Entertainment service is seasonal in nature: The film city, theme and water park industry are seasonal in nature. Film city and parks could experience volatility in attendance as a result of pandemic such as COVID-19 outbreak, vacations, public holidays, weekends and adverse weather conditions such as excessive heat and monsoons. In addition, its entertainment industry is expected to generate higher revenues in the summer months. Conversely, face a reduction in revenues during the monsoon months of this industry. In addition, unfavourable weather conditions or outbreak a Public Health Emergency etc. may reduce the attendance. For these reasons, there may be fluctuations in results of operations.
High working capital requirement: The company operates in a working capital-intensive industry therefore its business demands substantial funds towards working capital requirements. The company’s net working capital consisted of Rs 587.88, Rs 811.90, Rs 541.33 and Rs 1,307.77 lakhs for the financial year ended 2020, 2021, 2022 and for the period ended November 30, 2022, respectively. The net working capital requirement for the financial year 2023 and 2024 is projected to be Rs 2,492.07 and Rs 4,553.23 Lakhs, respectively. In case there are insufficient cash flows to meet its working capital requirement or it is unable to arrange the same from other sources or there are delays in disbursement of arranged funds, or it is unable to procure funds on favourable terms, at a future date, it may result into its inability to finance its working capital needs on a timely basis which may have an adverse effect on its operations, profitability and growth prospects.
Outlook
MOS Utility provides digital products and services in the B2C, B2B, and financial technology fields through an integrated business model. The company provides business opportunities for shopkeepers, retailers, students, housewives, professionals, and insurance agents to start their own online e-commerce business to promote the government’s “Vocal for Local” campaign. On the concern side, the company’s major revenue from operation is from fees and commission-based activities and its financial performance may be adversely affected by an inability to generate income from such activities. Moreover, its business is highly dependent on technology and any disruption or failure of technology systems may affect its operations.
The company is coming out with an IPO of 65,74,400 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 72-76 per equity share. The aggregate size of the offer is around Rs 47.33 crore to Rs 49.97 crore based on lower and upper price band respectively. On performance front, the company has reported an increase of 14.30% in total revenue at Rs 7,734.01 lakhs in FY22 as compared to Rs 6,766.39 lakhs in FY21, which is attributable due to increase in revenue from utility services, entertainment services, banking services, and travel services by Rs 630.46 lakhs, Rs 159.72 lakhs, Rs 120.99 lakhs and Rs 78.35 lakhs respectively. Moreover, the company’s profit after tax rose 1.95% to Rs 157.67 lakh in FY22 as compared to Rs 84.69 lakh in FY21.
Going forward, the company is aiming to continue growing each of its business segments and with a particular focus on its cross-selling strategies, which will further entrench its value proposition with its customers. There is continued scope for expansion given the growing demand for the various products and services that it offers. The company endeavours to continue to increase the engagement and retention of its customers on its platform by offering them relevant, innovative and integrated products. Moreover, the company’s track record and experience in providing technology related integrated services across sectors has given it deep and substantive knowledge of the needs of a diverse range of customers in different areas.
