BharatPe has experienced turbulent times due to issues surrounding corporate governance, alleged fraud, and internal feuding between promoters. The impact of these issues will be revealed when BharatPe files financial results for FY22. However, FY21, which was not affected by any of the issues, turned out to have been the first year of meaningful revenue for the fintech unicorn after it generated revenue of Rs 6.35 crore for FY19 combined.
As collections from the company’s business loans section grew substantially, revenue from operations jumped by around 20X to Rs 119.1 million in FY21 for the Delhi-based Company.
Tiger Global-backed company is principally engaged in providing aggregator services for various merchants and business customers, which offer them a single QR code to accept push payments through third-party UPI apps.
BharatPe acts primarily as a facilitator for lenders (financial institutions) to provide small-ticket loans to vendors.
It receives processing fees and commission income from loans it services through its lending partners. It doesn’t charge transaction fees for its QR codes or point-of-sale card machines.
During March 2021 fiscal, the fintech unicorn earned a financial income of approximately 66 crores.
Looking at the income statement, one can see that BharatPe has seen its annual expenses rise to Rs 1,804 crore. This amounts to a loss in FY21 of Rs 1619.22 Crore. Here’s how those numbers came to be.
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For the fiscal ending in March 2021, the company has incurred expenses of Rs 1.341.98 crore due to a “change of fair valuation of preference shares.” Compulsorily convertible preference securities (primarily used by startups to raise funds) that have a buyback clause and are compulsorily convertible are not considered equity.
BharatPe’s preference shares have appreciated in value, and this change was retroactively recorded as a noncash expense in the restated accounts of FY21 and FY20. The company’s FY21 expenses were Rs 462.03 crore, excluding the non-cash regulatory cost because the preference shares will eventually be converted to equity shares.
We looked at the expense sheet and found that transaction processing charges that the firm charges merchants are the largest cost center for BharatPe, accounting for 21.1% annually. These expenses grew by 423.6%, to Rs 97.5 crore in FY21, compared with Rs 18.62 crore in FY20. This is a result of the large increase in transaction volume on BharatPe.
This is evident in the 175.3% increase in IT infrastructure costs, which reached Rs 49.33 crore in FY21, compared to Rs 17.92 crore in FY20. However, the expenditure on merchant onboarding fell by 18.6% to Rs 28.4 Crore in FY21, compared to Rs 34.9 Crore in FY20. This is likely due to Covid-19 restrictions that limit vendor access.
Although onboarding has slowed down, BharatPe increased its team size quickly during the last fiscal. Technology was a key component of this growth. This allowed BharatPe to publically showcase the difficulty in finding tech talent. Unusual talent acquisition strategies were used to attract new members, including offering high-end BMW bikes and gadgets and an overseas trip. Its employee benefits payments soared nearly 170% to Rs 75.4 crore in FY21, compared with Rs 27.95 crore in FY20. These payments included 29.3% of the employee stock options.
BharatPe is the guarantor for loans drawn from vendors’ balances through its platform. It is also responsible for paying borrowers any losses resulting from default payments, as stipulated in their contracts. These financial guarantees resulted in Rs 56.5 crore of liabilities for the company during FY21, which means that 47.4% of its revenue was lost on bad loans.
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Advertising expenses grew only 4% to Rs 45 Crore, while outsourced services expenses grew 10.2% YoY at Rs 81.87crore in FY21.
FY21 was the first year of significant collections for the company. EBITDA margin in the fiscal increased to -141.01%, from -915.51% during FY20. BharatPe saw a fourfold increase in finance income, which helped ease the pressure. The annual losses of BharatPe grew by 34.1% to Rs 277.2 crore in FY21, compared with Rs 206.81crore in FY20.