Online grocery start-up BigBasket witnessed a surge in its revenues as it burnt high amounts of cash during FY19 to maintain growth in a segment that is being eyed by several e-commerce players.
Supermarket Grocery, which runs B2B operations for BigBasket, saw its revenue from operations jump by 74% to Rs 2,754 crore in FY19 from Rs 1,583 crore in FY18, according to its regulatory filings with the Ministry of Corporate Affairs.
Around 98% of the revenue, ie Rs 2700 crore flowed in through the sale of goods on its platform. Another Rs 53 crore was generated through advertising, witnessing a 90% jump from FY18. Importantly, income from both deliveries and commissions went down by 61.3% to Rs 2.4 crore in FY19.
The firm’s expenses also surged during the fiscal year. Its total expenses increased by around 80% from Rs 1877.5 crore to Rs 3,376.3 crore in FY19.
This increased spending to fuel demand pushed its losses to grow 2.1X to almost Rs 572 crore in FY19 from Rs 272 crore in FY18. Meanwhile, outstanding losses for the firm at the end FY19 stood at Rs 2,247.4 crore.
Most of the expenses came from employee benefit and business promotion. While the employee benefit expenses including ESOP buyback of Rs 53.4 crore, grew by 79% to Rs 277 crore in FY19 from Rs 155 crore in FY18. Business promotion and advertising expenses saw a sharp spike of 4.3X from Rs 44.4 crore in FY18 to Rs 189.15 crore in FY19 underscoring their high spends on customer acquisition and retention.
Other expenses included IT expenses which grew 62.5% from Rs 19.5 crore in FY18 to Rs 31.7 crore in FY19. The company also absorbed discounts and rebates amounting to Rs 145 crore on these sales during the year ended in March 2019.
Grocery, with its tendency of frequent purchases, has become the next cash cow for several e-commerce players in the country with both Flipkart and Amazon betting big on it and intensifying competition within the sector.
According to the consulting firm RedSeer Management, the online grocery sector in India is set to grow at a compounded annual growth rate of 60% from this $2.1 billion this year to $8.7 billion in 2022, making this an important market.
The surge in order volume on the BigBasket platform was also reflected by the almost 80% increase in the purchase of stock in trade which amounted to Rs 2,640.43 crore in FY19 as compared to Rs 1,474.06 crore in FY18. These purchases made up 77.14% of the total expenditure incurred by the company during FY19.
To fulfil the increased demand, BigBasket spent Rs 98.6 crore on the packaging and transportation which grew 2.2X as compared to Rs 44 crore it spent during FY18. Interestingly, payment gateway expenses actually went down from Rs 3.03 crore in FY18 to Rs 1.43 crore.
Paytm handles the payment gateway services for BigBasket and both are part of Alibaba’s investment in India. This reduction in payment collection costs could possibly be due to that synergy.
During the year ended in March 2019, BigBasket offloaded current financial assets worth Rs 1,507 crore to pump money into its operations and the current investments reduced by 95.6% to Rs 46.8 crores at the end of the period.
BigBasket operates through an inventory control model and spent around Rs 123 crore on infrastructure such as godowns and plants to support its supply chain. At the end of FY19, it held inventory worth Rs 208 crore, a jump of roughly 83% as compared to Rs 113.7 crore it held at the start of the fiscal.
The firm raised $150 million in April 2019 in a round by Mirae-Asset-Naver Asia Growth Fund, CDC Group and Alibaba group, which made BigBasket a unicorn — start-ups that are valued at $1 billion or more. This fundraise took several months to close, according to multiple people aware.
Meanwhile, the firm has made efforts to diversify its offerings by foraying into the milk delivery segment and offline sector via the installation of vending machines.
BigBasket CEO Hari Menon told that the firm will clock Rs 6300 crore in turnover at the end of FY20, doubling the number from FY19. It is currently present in 26 cities and competes primarily with another inventory model specialist~ Grofers.
As per a RedSeer report, these two players control nearly 70% of the hyperlocal grocery delivery market in India, which is worth nearly $1 billion.