BharatPe revenue grows by 20X and hits Rs 120 Cr in FY21
BharatPe has been through a tumultuous time due to corporate governance issues, alleged fraud and internal feud between promoters and backers. While the impact of these issues on the business will be known when BharatPe files FY22 financial results, FY21, when none of these issues had yet arisen, proved to be the first year of significant revenue for the fintech unicorn after generating income of Rs 6 crore for FY19 and FY20 combined.
The Delhi-based company saw its operating revenue increase about 20x to Rs 119.1 crore in FY21 as recoveries from its corporate lending segment increased significantly, as its annual financial statements with the Registrar of Companies (RoC) show.
The Tiger Global-backed company is primarily engaged in providing aggregation services to various merchants and business users, offering them a unified QR code for accepting push payments through third-party UPI apps.
BharatPe primarily acts as a facilitator for lending partners (financial institutions) to provide small loans for day-to-day working capital needs to vendors on its platform.
It earns commission income and processing fees on loans serviced through its lending partners. It does not charge transaction fees on its QR codes and point-of-sale card dispensers.
The fintech unicorn also earned financial revenue of around 66 crore in the fiscal year ending March 2021.
Looking through the income statement, it appears that BharatPe’s annual expenditure jumped to Rs 1,804 crore, representing a loss of Rs 1,619.22 crore in FY21. So here is the story behind this numbers.
The company recorded expenses worth Rs 1,341.98 crore due to a “change in the fair valuation of preferred shares” for the year ended March 2021. In accordance with IAS 32, mandatory convertible preferred shares (mainly used by the startup to raise funds) with a buy-back clause are treated as debt rather than equity.
BharatPe’s preferred shares appreciated significantly and this change was retroactively recorded as a non-cash charge in the restated accounts for FY21 and 20. As a result, the company’s actual expenditure for FY21 was approximately Rs 462.03 crore without the non-cash regulatory expenses as the preferred shares will eventually be converted into shares of the company.
Moving on to the expense sheet, we found that the transaction processing fees that the company absorbs for its merchants are the largest cost center of the business, accounting for 21.1% of BharatPe’s annual costs. These expenses jumped 423.6% to Rs 97.5 crore in FY21 from Rs 18.62 crore incurred in FY20, indicating the multitude of transaction volume growth on the BharatPe platform.
The increase in scale is also evident from the 175.3% growth in IT infrastructure costs which stood at Rs 49.33 crore in FY21 from Rs 17.92 crore in FY21. rupees in FY20. However, new merchant onboarding spending fell by 18.6% to Rs 28.4 crore in FY21 from Rs 34.9 crore in FY20. FY20, apparently due to limited physical access to vendors due to Covid-19 restrictions.
Although the integration may have slowed, BharatPe has rapidly expanded the size of his team over the past fiscal year, especially tech, doing more to publicly showcase the challenge of finding tech talent than anyone else can. This was done using unconventional talent acquisition strategies, including offering high-end BMW bikes, gadgets and overseas travel to new hires. As a result, its benefit payments jumped nearly 170% to Rs 75.41 crore in FY21 from Rs 27.95 crore in FY20. note that approximately 29.3% of these payments were settled via employee stock options.
BharatPe acts as a guarantor for loans made from seller balances on its platform and is responsible for reimbursing losses on borrowers’ defaults in accordance with the terms of their contract. The liability for these financial guarantees stood at Rs 56.5 crore in FY21, which basically means that the company lost around 47.4% of its income on bad debts.
Advertising expenditure increased by only 4% to Rs 45 crore, while outsourced services expenditure increased by 10.2% year-on-year to Rs 81.87 crore during the financial year 21.
With FY21 being the company’s first year of significant inflows, EBITDA margin in the fiscal year improved to -141.01% from -915.51% in FY20. The fourfold increase in financial income also eased the pressure and BharatPe’s annual losses increased by 34.1% to Rs 277.2 crore in FY21 from Rs 206.81 crore lost in FY21. during the year 20.
BharatPe demonstrated strong growth momentum in FY21 as its scale increased 20x with tight spending control, but the key question now is: will BharatPe be able to repeat this type of growth in FY22? Although it won’t be known until BharatPe files FY22 results, the company’s Managing Director, Suhail Sameer, recently claimed that despite the distractions of its infighting, the company will post revenue of Rs 700 crore over the course of the year. current fiscal year (FY22).
That number may or may not eventually arrive, but the biggest challenge for the company is regaining its credibility and the loyalty of the thousands of merchants it has onboarded, in addition to the financial partners who fund the loans to those merchants. Too many regulatory trouble spots won’t inspire confidence in either one.