Cab-hailing platform Ola is planning for a public listing in the next two years and has started taking baby steps towards improving its unit economics. This could be observed in their financials filed for the last fiscal.
The Bengaluru-based firm recorded a significant spike of 37.7% in operating revenue during FY19 by earning Rs 2,543.63 crore, according to its regulatory filings with the MCA. This number stood at Rs 1,847.53 crore in the previous fiscal. Ola was also able to trim its losses by 9% as the total expenses were limited to a growth of 6.3%.
This comes just days after the government reportedly plans to cap commissions of app-based tax apps to 10%. About three-fourth of Ola’s total income of Rs 1,888.13 crore came from commissions and convenience fee in FY19, making it a significant contributor. This was a notable 35% jump from Rs 1,400.6 crore earned in the previous fiscal.
Almost one-fifth of the firm’s operating revenues were generated by leasing out vehicles to drivers, which stood at Rs 484.71 crore in FY19, an almost 60% jump from FY18.
Meanwhile, Ola’s earnings through subscriptions – Ola Pass and Ola Select went down by 35.63% to Rs 27.21 crore in FY19 from Rs 42.27 crore in FY18.
The company earned another Rs 240 crore through interest and gain on sale on financial instruments. It sold financial instruments worth Rs 6,662.85 crore during FY19.
Even as total expenses for the SoftBank-backed firm grew by around Rs 319 crore to Rs 5,385.81 crore in FY19 from Rs 5,066.6 crore in FY18, Ola harnessed its assets to generate revenues efficiently. The total losses for the firm witnessed a decline of around 8.8 %, amounting to Rs 2,593 crore in FY19.
While this is an improvement of around Rs 250 crore from the loss figure of Rs 2,842.3 crore in FY18, the balance sheet also reflected carried forward business losses and unabsorbed depreciation of around Rs 11,392.10 crore at the end of FY19.
The biggest cost driver for the company was ‘driver-related expenses’ that accounted for about 32.5% of the total expenses. Importantly, Ola worked to reduce these expenses by 27% to around Rs 1,750 crore in FY19 from Rs 2,393 in FY18.
Further, Rs 460.4 crore was spent on expenses related to its food-delivery arm Foodpanda, which the company acquired in 2018 for a mere Rs 28 crore. Discounts and money lost on orders made up 38.5% of these expenses.
This reflects that the company shelled money on excessive discounts in order to compete with Swiggy and Zomato, only to completely shut down the food marketplace earlier this year.
In addition, about Rs 63 crore was set aside for money lost on credits given to Ola users in FY19. This expense grew 2.4X from Rs 26.61 crore in FY18.
Other expenses include the employee benefit component which rose 31.5% from Rs 574.67 crore in FY18 to Rs 755.51 crore in FY19. Despite the increase, employee salaries and perks and made up only 14% of the total expenditure. This could potentially come down in the coming fiscal as Ola is in the process of trimming its workforce and restructure the firm to make it IPO-ready.
Apart from this, another Rs 138.87 crore flowed into vehicle running expenses, which grew 2.25X from Rs 61.76 crore in FY18. Expenses on advertising, promotion and legal stood at Rs 469.02 and Rs 94.52 crore respectively during FY19.
During the last fiscal, the company made significant additions to its fleet of vehicles and spent nearly Rs 488 crore on it. The total worth of its fleet stood at Rs 1,155.66 crore (net of depreciation). But overall, Ola’s total assets were reduced by around Rs 982 crore from Rs 5,615.2 crore in FY18 to Rs 4,633 crore.
This was mostly due to the offloading of current investments by the company which reduced by 89.15% to Rs 156.7 crore at the end of FY19, just as revenues soared. Essentially, the company generated more revenue per rupee invested in assets and this was reflected in the asset turnover ratio which improved to 0.54 in FY19 from 0.43 in FY18.
If we look at the financial conditions of consumer-facing unicorns in India during FY19, Ola was undoubtedly in better health. About 38% jump in operating revenue and shrinking of losses by about 9% are good signs for the Bhavish Aggarwal-led company. Since the company is planning for a public offering by 2022, it is likely to improve significantly in ongoing fiscal.