Fintech Unicorn Slice’s Loss Widens Despite A 300% Rise In Operating Income.

Fintech Unicorn Slice’s Loss Widens Despite A 300% Rise In Operating Income.

Slice, a financial unicorn with headquarters in Bangalore, saw losses jump 2X to Rs 267 crore in FY22 from Rs 103.87 crore the year before.

The losses increased from the Rs 100 crore recorded in the previous fiscal to Rs 253.67 crore on a consolidated basis, which also takes into account the earnings of the group’s NBFC subsidiary, Quadrillion Finance Private Ltd.

At the same time, the company declared an operating income of Rs 182.53 crore, a huge increase from the Rs 37 crore it reported the previous year. On a consolidated basis, it increased by more than 300% to Rs 283 crore for the same fiscal.

This resulted in the fintech startup’s total consolidated income for FY22 reaching Rs 292.91 crore, an increase of 325% over Rs 68.85 crore in FY21.

Indian fintech companies are expanding rapidly, and the sector is projected to expand at a CAGR of 30%. Its rise is being fueled by factors like a rising middle class, increased internet and mobile phone usage, and government attempts to support digital payments.

But even after the high potential of Fintech companies in India, they are facing losses because of the rising expenses.

Rajan Bajaj founded Slice in 2016, a company that targets young people with little to no credit history and offers credit and payment cards (in collaboration with Visa and SBM Bank).

The primary source of income for the digital lending and payments platform was a fee and commission income, which climbed to Rs 148.97 crore from Rs 42.14 crore in FY21 and included commission on loans, services, and internet processing fees. Also, the revenue from interest on loans, which was Rs 134.11 crore in FY22, increased by 424%.

The company’s standalone expenses increased by roughly 240% to Rs 485.23 crore from Rs 143.6 crore in the prior fiscal year, according to data from the RoC filing. The total cost of operations was Rs 542.5 crore.

Slice spent Rs 209 crore on advertising and promotion, compared to Rs 6 crore the year before when examining the standalone expense.

At the same time, processing fees and customer onboarding costs also saw a significant increase, rising from Rs 5 crore to Rs 20 crore. In all, employee benefit costs for the year increased from Rs 32.85 crore to Rs 98.93 crore in FY22, including salary and wages.

Slice acquired a 5% stake in a small finance bank.

Slice has secured a 5% investment in the Indian bank North East Small Finance, which analysts say is a crucial milestone in the journey of the unicorn fintech startup against rising obstacles from the central bank that have already brought down many start-up businesses.

According to a regulatory filing, the startup, with its headquarters in Bangalore, contributed $3.42 million for a 5% investment in the Guwahati-based small financing bank in September.

The investment comes at a time when the Reserve Bank of India (RBI) has severely restricted the growth of numerous fintech businesses engaged in the card and loan industries by requiring strict adherence to harsh new regulations.

It was not immediately clear how Slice, a $1.55 billion business with backing from Tiger Global, Insight Partners, Blume Ventures, and Axis Bank, would benefit from acquiring a stake in a bank, despite the fact that doing so is admittedly an uncommon and ostensibly significant milestone for a startup.

The second-most populated country in the world is going through an exciting period right now as banks and fintech companies look for methods to enhance their interactions. In recent years, as entrepreneurs sought to expand their operations, Federal Bank and SBM Bank India courted them as clients.

ICICI and HDFC, two gradually larger banks, have increased their discussions with younger companies. Recent investments have been made in Mintoak, a SaaS platform that offers merchant services in India and other markets, by HDFC, the largest private bank in India.

Why Indian Fintech Industry facing losses?

India’s consumer-facing fintech unicorns saw their losses increase significantly even though they experienced strong revenue growth in Fiscal Year 2022. To take advantage of a rise in demand for their goods and services, businesses aggressively spent on advertising and promotions.

Data collated by a source indicates that five of these unicorns—PhonePe, Acko, Cred, Groww, and OneCard—that have submitted their FY 22 results to the Ministry of Corporate Affairs (MCA) spent close to 1.6x to 11x more on advertising and promotions than they did a year earlier.

In FY 22 compared to FY 21, these companies’ losses increased by 1.2 to 5.5 times, with PhonePe reporting the largest loss of Rs 2,013 crore.

The founder and creative partner of skin-in-the-game marketing value-added investment business Spring Marketing Capital, Arun Iyer, explained the rationale for expensive promotional spending. He asserted that increasing awareness of a fintech company’s cutting-edge goods is its most important objective.

In his opinion, fintech companies must also concentrate on educating customers about their products in a rapidly evolving digital environment that they can find challenging to understand.

These unicorns also aggressively spent on payroll and other operating costs during that time, but advertising and marketing expenditures increased the greatest overall. In FY 22, 24–60% of the companies’ overall expenses were related to advertising and marketing.

The financial unicorn Cred, managed by Kunal Shah and valued at over $6 billion, spent the most on marketing and advertising during the year of the group. According to the report, Cred spent Rs 976 crore in FY 22 compared to Rs 324 crore in FY 21.

The business’s promotional costs were 2.5 times more than its annual sales of Rs 393 crore.

Cred also spent more on advertising than PhonePe, which was recently valued at $12 billion following the announcement of a significant $1 billion financing from international private equity and venture capital investors.

The unicorns in the set all showed significant revenue increases in FY22 compared to FY21. Groww recorded the biggest revenue growth over the course of the year, nearly 12 times, while PhonePe, which had a bigger base in FY 21 than the other unicorns in the group, saw the lowest revenue growth of 133 percent.

Edited by Prakriti Arora