Online classifieds major Quikr has been struggling for the past couple of years as it failed to raise follow-on capital and improve its unit economics. Despite a 74.6% growth in operating revenue during FY19, things don’t look too good for the company that has acquired over a dozen startups.
While we analyse the usual revenue, loss and other important numbers of the company, we find the independent auditor’s report very disconcerting.
The auditor has issued a “qualified opinion” on Quikr’s consolidated financial statements due to “material weakness” in the company’s internal financial controls. Further, the auditor raised significant doubt on the ability of Flat Dot To Technologies (Quikr’s subsidiary) to continue as a going concern due to erosion of its net worth.
Coming to the company’s overall financial health during FY19, it earned net operating revenue of Rs 192 crore, almost a 75% increase from Rs 109.5 crore the company made in FY18. Additionally, Quikr made Rs 10.23 crore from interest on deposits and through selling mutual fund investments.
The biggest contributor to operating revenue was income earned through lead referrals and commissions, which stood at Rs 88.8 crore during FY19. Importantly, these revenues have reduced by Rs 1.34 crore when compared to Rs 90.14 crore it earned during FY18.
This is possibly due to the shift in the company’s focus on providing management and marketing services for rental house properties. Income from rental property management was recorded at Rs 85.15 crore during FY19, growing 10.3X from Rs 7.5 crore in FY18.
Income from advertising grew only 2.8% for the Bengaluru-based firm in the last fiscal. It earned about Rs 50.1 crore from advertising as compared to Rs 48.7 crore in FY18. Revenue from the beauty vertical has grown 2.16X to Rs 24.5 crore for the period ending March 2019 from Rs 11.53 crore in FY18.
Income from beauty services also contributed Rs 24.5 crore, growing 2.16X from Rs 11.53 crore in FY18 apart from Rs 45 crore it earned through provision of RTO and handyman services on its platform.
The above-mentioned figures for different segments are gross revenue figures and the company burned Rs 102.4 crore in customer compensations and incentives during the year, increasing by 56.3% from Rs 65.5 spent on the same during the previous fiscal.
On the expenses front, Quikr spent 16.22% more ~ Rs 437 crore ~ in FY19 as compared to Rs 376 crore in the preceding fiscal. Employee benefit expenses have dropped by 7.14% to Rs 198 crore in FY19 from Rs 213.23 crore in FY18. Likewise, Quikr also controlled its IT expenses by 25.4 % to Rs 9.1 crore while finance and depreciation expenses added another Rs 48.54 crore to the expense sheet during FY19.
As far as losses are concerned, they witnessed a decline of 2.96% to Rs 230.4 crore in FY19 from Rs 237.43 crore in FY18.
The company is in the midst of regrouping its resources as evident by the changes in the company’s balance sheet. It offloaded investments worth Rs 146.41 crore during the year and the current investments dropped by 89% to Rs 17.6 crore at the end of FY19.
Quikr borrowed Rs 104 crore during the year to sustain operations in contrast to Rs 28.65 crore it raised from the issue of shares. Not being able to find an investor at this stage can turn disastrous for the company which sports accumulated losses of Rs 2,505 crore at the end of FY19.
Looking at the financial health of Quikr in FY19, one could sense that the company’s prospect isn’t on a good track. While the company has not been able to raise an equity round after 2016, it recently laid off 1,000 plus employees after unearthing a fraud that was reportedly in the tune of many crores.
Given that the firm is almost 12 years old, it should have been able to churn out a profit but factually, Quikr’s losses are still higher than its operating revenue. It’s indeed a big concern for Pranay Chulet and his backers. Since profitability is still a distant dream for the firm, raising capital is the only way left to avoid unfortunate incidents. Otherwise, it may have to go in for mass layoffs and shut down several verticals.