Despite 55% decline in revenue, Google India profit grew by 16% in FY19

The general anticipation of Google India to reach Rs 10,000 crore revenue in a fiscal has taken a nosedive as the search giant's Indian business has witnessed a 55.5% decline in revenue to Rs 4,147 crore in FY19.

In the previous financial year, the revenue figure had soared to Rs 9,337 crore. The sharp decline in Google's revenue was caused after the implementation of Indian Accounting Standards (IND AS) last year.

Google India recorded net revenue figures generated from the sale of internet Ad space and enterprise products as per IND AS 115. 

It means that the gross figures of Rs 9,203 crore for sale of Ad space and Rs 298.3 crores for sale of enterprise software were adjusted with the respective direct costs incurred to procure these services from Google Asia Pte(GAP) and Google LLC.

For the unaware, IND AS 115 came into effect for reporting periods from April 1, 2018, after the Ministry of Corporate Affairs issued the Companies Amendment Rules 2018.

In a nutshell, Google India revenue fell due to the change in accounting standards.

During the same period, the company has recorded a significant rise in profit. The profit rose by 16% to Rs 473 crore in FY19. The profit quotient increased as the company cut back on its expenses by 61% to Rs 3,416 crore in FY19 from around Rs 8,711 crore in FY18. 

The major reduction in expenses was again due to the implementation of IND AS 115 as the purchase of ad space from GAP amounting to Rs 8,105.9 crores was not included in total expenses. At the same time, the company spent less on other expenses, including consulting and promotional expenses which are down by 49.4% and 33.3% respectively.

On the other hand, Google India handed out around Rs 1,440.7 crores in salaries and perks, which is a jump of 33.2% as compared to Rs 1,081 crores the last fiscal.

This is a remarkable display of corporate governance and management of expenditure has helped the company to stack up around Rs 1,922 crores in retained earnings in FY19.

Working towards expansion in India, Google India granted a loan of Rs 760 crores to its sister entity Google Connected Services, which primarily works with software development. The company also earned close to Rs 2,900 crores by exporting services to US-based Google LLC and Google Ireland Limited.

As per the annual report, Google's advertising business makes up about 28% of the company's revenue, while IT Services and cloud computing make up the rest 72%. 

In India and across the globe, Google dominates the digital advertising business followed by social media behemoth Facebook. According to the latest report by KPMG, both contribute about 70-80% of India's digital advertising marketing, which stands at Rs 16,000 crore.

Apart from the two entities, e-commerce giants, Amazon and Flipkart, estimated to corner 10% share of overall money spent by brands online in India during FY19.