Four-year-old ShareChat burnt Rs 440 Cr with zero operational revenue in FY19

Last quarter of the calendar year is a particularly interesting time for a business journalist as companies file their financial performance of the previous fiscal. The annual financial report gives a holistic and authentic picture of any company - large or small.

While Dunzo financial performance in FY19 was surprising for many because the firm spent Rs 225 to earn a rupee in the last fiscal, Bytedance’s rival ShareChat financials would appear more intriguing to you. The company has recorded a loss of Rs 414.73 crore without any revenue from actual operations in FY19.

Importantly, it posted NIL operational revenue in FY18 as well. The losses for the Twitter-backed company has soared in tune of 12.3X from Rs 33.8 crore in FY18. Its total income ~ Rs 25.8 crore ~ consists of revenue earned through interest on investments and gains on the sale of investments only.

ShareChat has been investing heavily in financial assets as the current assets rose 4.13X from Rs 92.18 crore to Rs 381.21 crore. These investments make up about 77.4% of the total assets of the company, which stand at Rs 492.57 crore at the end of FY19.

During the previous fiscal, it purchased investments worth Rs 1,210 crore and gained Rs 14.07 crore on the total sales of investments worth Rs 920.8 crore made by the company in FY19.

Apart from investments, ShareChat splurged massively on sales and marketing. The total business promotion expenditure by the firm crossed Rs 305 crore in FY19, making up almost 70% of the total spending made by the company during FY. These expenses took a massive 67X jump as compared to Rs 4.6 crores in FY18.

Employee benefit expenses also shot up 3.2X to Rs 29.3 crore in the last fiscal from Rs 9.03 crore in FY18, while the directors hiked their salaries by 73%, totalling to Rs 2.66 crore.

The surge in the above expenses resulted in a 12.4X hike in total expenditure, which amounted to Rs 440.55 crore in FY19 in contrast to Rs 35.5 crore in FY18. Net cash outflows from operations also swelled up 13.8X to Rs 433.81 crore in the last fiscal from Rs 31.46 crore in FY18

Over the past two years, vernacular social media space has turned hyper-competitive with the entry of Bytedance-owned Helo. ShareChat and Helo have been burning much money to command more market share.

Since both companies have prioritised growth, monetising isn’t on their agenda at the moment.

It's worth noting that ShareChat is different from 90% of startups as it's building a vernacular-only social networking platform for about a billion Indians in their own language.

Such attempts certainly take time to reach the monetisation phase. Nevertheless, the question remains - how long ShareChat can afford to avoid making revenue? For background, it would enter in its fifth year of operations soon.