IPO Note : OnEMI Technology Solutions by Arihant Capital
Investment Rationale:
Structural play on India's mass-market credit gap with a proven digital-first model: Kissht is positioned at the intersection of two durable structural tailwinds. India's household credit-to-GDP at 45.6% (vs. 68–74% in developed markets) and the massmarket segment's projected expansion from 31% to 37% of the population by FY30. Critically, this is not a crowded trade: banks structurally lack the data, product design, and risk appetite for thin-file, sub-INR 75,000/month income borrowers, while traditional NBFCs are slow to digitise. Kissht has spent nine years building the only credible infrastructure to serve this cohort at scale — 63.7 mn registered users, a pan-India merchant QR network across 52,396 outlets, and a proprietary credit stack trained on 10 billion+ data points.
Capital-light fee income scaling alongside a growing on-book AUM:
Sourcing and servicing fees from the off-book portfolio grew from INR 774 mn in FY23 to INR 4,138 mn in 9M FY26 — with 47 lender partners and no on-balance sheet risk on that portion of the book. With a D/E of only 1.63x versus Bajaj Finance at 3.1x, Kissht has meaningful headroom to scale on-book lending while simultaneously growing this capital-light fee stream. Together, these two engines — balance sheet NII and platform fees — provide revenue diversification uncommon at this AUM scale.
Improving credit quality unlocking operating leverage:
Impairment costs halved from INR 6,212 mn in FY24 to INR 3,268 mn in FY25, even as AUM grew 57%. Bounce rates fell from 18.96% to 14.98%. As the book continues to season under a higher-quality borrower mix and longer tenures, credit costs as a percentage of AUM should compress further. Combined with the fixed-cost nature of technology infrastructure and collections capacity already in place, incremental AUM growth should flow through to PAT at a meaningfully higher conversion rate than historical levels.
Valuation & Outlook:
OnEMI is at an inflection point where the foundational investments in technology, collections infrastructure, branch network for LAP, and lender partnerships are largely sunk, positioning the company to harvest operating leverage on incremental AUM growth. With total AUM at INR 59,558 mn as of December 2025 and a residual loan tenure of nearly 15 months already locked in, near-term revenue visibility is reasonable. The strategic pivot to longer-tenor, lower-rate, higher-quality borrowers, while compressing FY25 revenues, has structurally improved the credit cost trajectory — and as this cleaner vintage seasons, NPA normalization and lower provisioning requirements should support PAT expansion. At the upper band of INR 171, the issue is valued at a P/E ratio of 10.84x, based on annualized EPS of INR 15.77. We are recommending a “Subscribe” rating for this issue.
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