OnEMI Technology IPO struggles with low demand, weak GMP: Why it's a high-risk bet

The IPO of OnEMI Technology Solutions is off to a weak start, with muted subscription and low grey market premium raising concerns about investor interest and risk.

On Day 1, the issue was subscribed just 0.25 times. Retail participation remained extremely weak at 0.06 times, while qualified institutional buyers subscribed 0.69 times and non-institutional investors 0.11 times.

Grey market trends also reflect caution. The IPO’s GMP stands at around Rs 4, suggesting an estimated listing price of Rs 175 — a modest 2.34% premium over the upper price band of Rs 171. This points to limited listing gains and subdued sentiment.

WHY IS ONEMI TECHNOLOGY IPO SEEING LOW DEMAND?

The weak response is largely due to concerns around the company’s business model, credit risk, and near-term growth visibility.

OnEMI operates in the digital lending space through brands like Kissht and Ring, focusing on borrowers with limited credit history. While this segment offers strong long-term growth potential, it also carries higher default risks.

KEY RISKS HIGHLIGHTED BY ANALYSTS

According to an IPO note by Geojit Investments Limited, the business comes with several structural risks that make it suitable primarily for high-risk investors.

One of the biggest concerns is the borrower profile. The company targets low- to middle-income customers, often with thin credit files, making them more vulnerable during economic stress.

The note also highlights that although credit quality has improved recently, with lower impairment costs and declining bounce rates, sustaining this trend will be critical. Any deterioration could impact earnings.

Another key risk is the company’s dependence on external NBFC partners for loan disbursement, KYC and collections. This reliance creates operational and execution risks if partnerships weaken.

BUSINESS TRANSITION ADDS UNCERTAINTY

OnEMI is currently shifting towards higher-quality borrowers and longer-tenure loans. While this is expected to improve stability over time, it has already impacted revenue growth in the near term.

This transition phase adds uncertainty, making earnings visibility less predictable.

VALUATION MAY LOOK REASONABLE, BUT RISKS REMAIN

At the upper price band of Rs 171, the IPO is valued at a P/E of around 10.8 times based on annualised earnings.

While this valuation may appear reasonable, it hinges on the company’s ability to scale profitably while managing credit risks — a challenge in the unsecured lending space.

LOW GMP AND SUBSCRIPTION SIGNAL CAUTION

The combination of low subscription and muted GMP indicates that investors are approaching the IPO cautiously.

Key concerns include:

Limited listing upside

Exposure to unsecured lending risks

Evolving business model

Dependence on third-party lending partners

The IPO provides exposure to India’s growing digital lending market, which benefits from rising financial inclusion and credit demand.

However, the risks are significant.

Given the weak demand, low GMP, and structural risks flagged by analysts, the issue appears suitable only for investors with a high-risk appetite and a long-term investment horizon.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)

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