Why OnEMI IPO Saw Tepid Demand Despite Attractive Valuation

The initial public offering (IPO) of OnEMI Technology Solutions, which operates the digital lending platform Kissht, witnessed a subdued response from investors, with the issue subscribed just 79% on the final day of bidding on Tuesday.

According to NSE data at 3:00 PM, the ₹926-crore IPO received bids for 2.77 crore shares against the 3.97 crore shares on offer. While the Qualified Institutional Buyers (QIBs) portion saw relatively better traction at 1.52 times subscription, the non-institutional investor (NII) category was subscribed 0.81 times. Retail participation remained particularly weak, with the segment subscribed only 19%, reflecting limited interest from individual investors.

The muted demand comes despite the company raising ₹278 crore from anchor investors ahead of the issue and pricing the IPO at a relatively moderate valuation.

Valuation Attractive, Risks Weigh on Sentiment

The IPO is priced in the range of ₹162–171 per share, valuing the company at around ₹2,900 crore at the upper end. The issue comprises a fresh issue of ₹850 crore and an offer for sale (OFS) of ₹76 crore by existing investors.

Analysts note that while the valuation appears reasonable compared to peers, investor sentiment has been weighed down by concerns around the company's business model and macroeconomic environment.

Shivani Nyati, Head of Wealth at Swastika Investmart  pointed out that the IPO is priced at around 10.8x earnings, significantly lower than peers such as Bajaj Finance, which trades at much higher multiples. However, the discount has not been sufficient to offset investor concerns.

Nyati highlighted that the company's heavy reliance on unsecured lending with nearly 94% of its loan book unsecured and raises credit risk, particularly in a volatile macro environment. Additionally, inconsistent profitability, with net profit declining to ₹160 crore in FY25 from ₹197 crore in FY24, has further dampened investor confidence.

Market experts also attribute the lukewarm response to broader macroeconomic uncertainties.

Vinit Bolinjkar,Head of Research, Venturas noted that the IPO comes at a time when geopolitical tension in West Asia have increased volatility in financial markets. Rising crude oil prices, tighter liquidity conditions and elevated interest rates are putting pressure on credit quality across the lending ecosystem.

For a digital lender like OnEMI, these risks are more pronounced due to its exposure to unsecured retail loans, which are typically more vulnerable to repayment stress during economic slowdowns.

He added that investors are increasingly cautious about potential slippages and rising credit costs, particularly in segments without collateral backing. This risk perception has contributed to the subdued subscription levels.

The grey market premium (GMP) for the IPO has remained modest, indicating limited listing upside.

Current estimates suggest a listing price of around ₹172–175 per share, implying a marginal gain of just 1–3% over the upper end of the issue price. Such muted expectations are consistent with the overall weak subscription trend.

Analysts believe that a tepid subscription typically results in a flat or marginal listing, unless supported by strong last-minute institutional demand or positive market sentiment.

Scalable Model, Execution Key

OnEMI operates a technology-driven digital lending platform, offering fast loan disbursals through a hybrid model that combines its own lending with partner-led loans. The company has built a large base of registered users and relies on proprietary data-driven underwriting systems.

While these factors provide scalability, analysts caution that the business remains exposed to regulatory risks, operational challenges and the need for continuous capital infusion to support growth.

The company also faces intense competition in the digital lending space, along with evolving regulatory norms for non-banking financial companies (NBFCs), which could impact future growth.

Proceeds from the fresh issue will primarily be used to fund capital expansion in its subsidiary, Si Creva, along with general corporate purposes. The company aims to strengthen its lending capabilities and expand its customer base.

However, experts believe that the success of the IPO and the company's long-term valuation will depend on its ability to improve asset quality, diversify its loan book and deliver consistent earnings growth.

Wait-and-Watch for Investors

The subdued response to the OnEMI IPO highlights a cautious approach by investors towards digital lending businesses, particularly those with high exposure to unsecured credit.

While the valuation offers some comfort, concerns around asset quality, profitability and macroeconomic risks have kept demand in check.

Going ahead, analysts suggest that the stock may require a few quarters of stable performance and improved financial metrics before it can attract stronger investor interest and achieve meaningful re-rating.