Payment aggregator platform BharatPe became the 19th unicorn startup in India 14 days ago after raising $ 370 million in its Tiger Global-led Series E round. The mammoth round of funding was raised at a valuation of $ 2.85 billion, making BharatPe the fifth highest value Fintech companies in India after Paytm, PhonePe, Razorpay and Pine Labs.
Immediately before the fundraiser was announced, the company had claimed its annual revenue grew 7-fold to Rs 700 crore in FY21 of around Rs 110 crore earned in FY20. While the company has yet to submit audited figures for the last fiscal year, the company has submitted its annual accounts for fiscal 20 to the RoC.
Trickypedia took a deep dive to understand BharatPe’s financial health.
The mantra “growth at any price”
Resilient Innovations Pvt Ltd, the holding company of BharatPe and its lending business, had revenues of Rs 5.96 billion in FY20, as opposed to FY19 when they had no operating revenues. These revenues were primarily generated by providing unsecured small-ticket loans to merchants and collecting commissions on transactions.
The loans were drawn from its subsidiary Resilient Capital Private Limited, which was founded in May 2019 and made a profit of Rs 8.05 lakh in its first year of operation. In particular, BharatPe claimed to have disbursed 20 loans totaling Rs 150 crore to its member dealers during the fiscal year.
While revenues were limited in FY20 as it was only the company’s second year of operations, BharatPe burned a lot of money trying to establish itself in the hyper-competitive Indian payments sector. The company saw annual expenses increase 895.3% to Rs 229.12 billion in FY20 from Rs 23.02 billion in FY19.
At the unit level, BharatPe spent Rs 38.44 to generate a single rupee in sales in the fiscal year ended March 2020.
Rs 142 Cr as other expenses
In the expense overview, the largest single item was posted under “Other expenses”, which accounted for almost 62% of the annual cash burn. That spending had soared 11.6 times in FY20 to Rs 141.8 billion from Rs 12.2 billion in FY19.
When contacting Trickypedia, BharatPe has refused to comment on the nature of the unexplained miscellaneous expenses on its income statement and history. However, it appears that these include the payment processing fees (including MDR) incurred by the company among other growth-oriented investments.
BharatPe claims to have climbed around 24 lakh dealer members on its platform by the end of fiscal year 20. And the takeovers of these dealers came at a price: It Spent a lot on customer acquisition and brand development since Advertising and promotional costs were the second largest cost driver for the Delhi-based company.
That spending skyrocketed 9-fold to Rs 43.2 billion in FY20, from Rs 4.8 billion.
The Ashneer Grover-led company recently hit the headlines for its unconventional talent acquisition strategy earlier this year by offering high-end BMW motorcycles, gadgets, and an overseas trip for new additions to the technology and product teams. These expenditures will surely inflate employee benefit spending this tax year. In FY20, pension costs accounted for 12.2% of annual costs and increased 11.1-fold to Rs 28 billion in FY20.
In addition, BharatPe’s IT costs rose 7.3 times to Rs 4.06 billion, while legal and technical costs jumped 6 times to Rs 5.2 billion in FY20.
During FY20, BharatPe posted an annual loss of Rs 216.32 billion, up 9.4 times from Rs 23.02 billion in FY19. With a catastrophic EBITDA margin of -1684.4% in FY20, the current cash burn seems difficult for the company to hold in the growth phase.
Will BharatPe Have Sales Of Rs 700 Cr In FY21?
FY20 numbers for BharatPe show that the company was hunting for growth (traders) at all costs. That growth was intentional and worked well for the company: it brought much-needed momentum that resulted in three fundraisers that raised nearly $ 615 million in cumulative the company.
While BharatPe’s financial performance doesn’t look overwhelming in FY20, things could look different in the future as the company added multiple layers of monetization like Point of Sale (PoS) and lending in FY21. In the current fiscal year, the company started peer-to-peer (P2P) lending and is likely to also start operations at PMCBank in partnership with Centrum. These channels will fill the company’s revenue coffers in FY21 and in the current fiscal year (FY22).