Apple India profit drops by over 70% to Rs 262 Cr in FY19

The premium smartphone market in India has been changing over the past two-three years with OnePlus taking centre stage. The Chinese smartphone maker has taken over Apple to command the largest market share in the premium segment. 

The growing clout of OnePlus range of devices in the segment can easily be gauged from Apple India’s annual filings in FY19.

With over 19% decline in revenue, Apple India posted a total revenue of Rs 10,538.2 crore in FY19 from Rs 13,048.7 crore in the previous fiscal. 

Sales of Apple devices and software services accounted for 93% of overall revenue while the rest 7% came from the tech support services provided in India and overseas. 

Close to 20% drop in revenue is largely steered by its target audience swaying away from the company’s products on the pretext of exorbitant pricing and lack of innovation. Sales of the product in FY19 stood at Rs 9,743.76 crore, a decent 22.04% reduction from Rs 12,500.7 crore in the previous fiscal. The company’s net operating cash outflows were Rs 635 crore in FY19, in contrast to positive cashflows of Rs 1,074.5 crore in FY18.

While Apple India’s total expenditure dropped 13.5% to Rs 10,152.5 crore in FY 19 from Rs 11,740.7 crore, its profit also took a hit of about 70.7%. Apple India’s profit stood at Rs 262.27 crore in FY19 as compared to Rs 896.3 crores in FY18.  

The biggest cost component was the cost of traded goods sold, which at Rs 8006.5 crore make up about 79% of the company’s total expenditure.

The slump in sales can also be measured by the 20.8% drop in the purchase of stock-in-trade during the year, which reduced to Rs 8,334.8 in FY19 from Rs 10,530 crores in the preceding fiscal.

Notably, a huge chunk of stock in trade and spare parts (including capital goods) were imported from overseas vendors, and the company spent Rs 6,785.7 crores in forex to pay for the same.

Although a little late to the party, Apple finally paid attention to the rapidly growing Indian smartphone user base, and it was is visible as the company spent more money in India specific ad campaigns and promotions. Its advertising and promotional expenditure recorded an 8.5X jump in FY19, totalling at Rs 415.4 crore. 

Likewise, Employee benefits expenses also rose about 48% to Rs 518.8 crore in the last fiscal from Rs 350.33 crore in FY18. The income statement also included an unexplained expenditure worth Rs 218.16 crore. 

It’s worth noting that Apple has been facing flaks globally for its aggressive tax planning and saving on taxes by funnelling its money through subsidiaries set up in nations with low tax rates, vis-a-vis Ireland.

The story is eerily similar in India as well, as the company is contesting as much as ten different cases of tax disputes in various forums ranging from High courts and tax tribunals. The total disputed tax liabilities as on 31.03.2019 are around Rs 502 crore.