PhonePe recorded INR 1,727 Cr losses in FY21, and Revenue Jumped 86%.
In FY21, PhonePe‘s operational revenue increased by around 86 percent to INR 690 Cr. The startup’s income from payments and related services increased from INR 371.8 Cr in the previous fiscal year to INR 686 Cr in FY21. Employee benefit costs for the company increased by 157% to INR 1,235 Cr in FY21.
PhonePe, a Flipkart-backed digital payments company, saw its losses cut somewhat by 2.5 percent to INR 1,727.8 Cr in FY21, thanks to a significant increase in operating income. The company reported a total loss of INR 1,771.5 Cr in FY20, according to its most recent filings with the Ministry of Corporate Affairs.
In FY21, PhonePe’s operational revenue increased by around 86 percent to INR 690 Cr. The startup’s income from payments and related services increased from INR 371.8 Cr in the previous fiscal year to INR 686 Cr in FY21. Despite its higher costs, PhonePe’s bottom line improved. Compared to the INR 2,202.7 Cr recorded a year prior, its total expense for FY21 was INR 2,456 Cr.
Employee benefit costs for the company increased by 157% to INR 1,235 Cr in FY21. Depreciation, depletion, and amortization costs also went up, from INR 87 Cr in FY20 to INR 133.5 Cr in the year.
However, PhonePe may be able to reduce its other costs, such as those related to marketing and payment processing fees, from INR 1,634.5 Cr in FY20 to INR 1,085.5 Cr in FY21. PhonePe was established in 2015, and Flipkart purchased it in 2016. After Walmart, a US-based retailer acquired Flipkart Group later in 2018 and became a part of Walmart.
With nearly 6 billion transactions in May this year, Unified Payments Interfaces (UPI) ‘s real-time payment system shattered its record. PhonePe also recorded record transactions of INR 5.11 lakh crore. In May, PhonePe only accounted for 49% of the total amount of UPI transactions across all apps.
The recent months saw PhonePe continue its acquisition binge. For a total of $75 million in May, it purchased the two wealth management businesses, WealthDesk and OpenQ. The business purchased GigIndia earlier in March for an unknown sum. A B2B market for on-demand task fulfilment for independent micro-entrepreneurs is called GigIndia.
On the other hand, the Singapore Court Dismissed the appeals made by the marketing company based Affle that contested the transaction, moving the acquisition of Indus OS by PhonePe forward in April.
There have recently been rumours that PhonePe is preparing for an IPO once this turns a profit, which it anticipates doing in 2023. I had no knowledge my firm was seeking an IPO, the company’s founder and CEO subsequently said in a Tweet in response to the report.
Since the start of this year, PhonePe has dominated the universal payment interface, or UPI, ecosystem, far outpacing Google Pay, its nearest competitor. The company outperformed its rivals in the final four months of FY21, which is evident in the revenue figures from the financial year that concluded in March 2021.
The payments company with headquarters in Bengaluru could increase its operational revenue by 85.5 percent to Rs 690 crore in FY21 and over Rs 372 crore in FY20. While providing payments and related services accounted for the lion’s share of this income, PhonePe also made Rs 3.85 crore from its insurance industry.
While marketing costs are down by 47%, employee benefit costs increased by almost 2X.
Employee benefits, which made up 50.3% of the total yearly costs, were the company’s most significant cost centre in terms of expenditures. From Rs 480.3 crore in FY20 to Rs 1,235.2 crore in FY21, this expense increased by 2.6X. Notably, employee stock options accounted for Rs 842.7 crore, or 68.25 percent, of these payments.
The company works with outside contractors in addition to its workforce. In FY21, it spent 230.5 crores on third-party labour, an increase of 11% from FY20’s 208.5 crores.
The corporation considerably reduced its advertising and sales efforts during the fiscal year that was negatively impacted by the COVID 19 epidemic. From Rs 1,016.6 crore in FY20 to Rs 535 crore in FY21, these expenses decreased by 47.4%.
Total loss in FY21 is unchanged at Rs 1,728 Cr.
The total costs for PhonePe India’s fiscal year that ended in March 2021 were Rs 2,456 crore, an increase of 11% from the annual expenses of Rs 2,203 crore in the prior fiscal year. For every penny of operating revenue it generated in FY21, it spent Rs 3.56.
While EBITDA margins for the same time increased slightly to -219.9 percent, losses for the year remained primarily unchanged at Rs 1,728 crore. PhonePe’s balance statement demonstrated tremendous losses of Rs 6,329 crore as of March 2021.
The company’s losses need to be controlled as it haemorrhaged heavily in FY21, even if PhonePe has succeeded in limiting costs and registering an unprecedented 85 percent surge in the collection. According to analysts monitoring the digital payments industry, earning profit from payments is challenging. PhonePe’s diversification into financial services and probable entry into lending will only bring considerable revenue in the years to come.
Notably, the payment company’s linked party transactions during FY21 had a gross value of Rs 1,910 crore. This includes, among other things, the cost of the ESOP expenses totalling Rs 842.5 crore, which PhonePe’s Singapore-based company would cover.
Additionally, the National Payment Council of India (NPCI) plans to control UPI’s market share, which will inevitably have an impact on PhonePe’s hegemony in the UPI ecosystem.
Reducing marketing expenses and cashback will also stop the competition for market share and potentially lower costs for the Flipkart-owned business.
While their overall revenues increased in the fiscal year 2017–2018, online marketplaces suffered significant losses, including Flipkart-owned payments subsidiary PhonePe Pvt Ltd. In the year that saw a massive increase in its share of the market and transaction processing volume, the company spent over Rs 70 crore every month to generate about Rs 3.56 crore in revenue.
Even while PhonePe’s revenues increased by just Rs 3.02 crore to Rs 42.79 crore in FY18, the startup nevertheless incurred net losses of roughly Rs 791.03 crore, a significant increase from Rs 129.01 crore in FY17. Overall, the e-payments wallet lost more money than it made in running expenses.
Not all online marketplaces experience losses, including PhonePe. Including Flipkart Online and Flipkart India, its parent organization, Flipkart, reported total losses of Rs. 3,222 crore in FY18. The company’s B2B branch, Flipkart India, reported a sharp increase in losses at Rs 2,063.8 crore, while its e-commerce platform, Flipkart Internet, reported a combined loss of Rs 1,160.6 crore for FY18.
One97 Communications, the parent company of Paytm, the leader in electronic payments and a competitor of PhonePe, reported an immense net loss of 1,490.4 crores for the most recent fiscal year as opposed to Rs 879.6 crore in the prior fiscal. However, One97 Communications’ operating revenues more than doubled to Rs 2,987.41 crore in FY2017–18 from Rs 624.76 crore in FY2016–17.
Edited by Prakriti Arora
