The rental economy has gradually been gaining ground in India with millennials in the top 5 cities opting to rent expensive items such as furniture and home appliances over buying them. The growth of the rental economy is evident from the financial performance of Rentomojo in FY19.
According to regulatory filings, the company has managed to achieve a 3 folds growth in revenue from operations which grew from Rs 35.5 crore in FY18 to Rs 107 crore in FY19.
Notably, only 47.5 % ~ Rs 51.3 crore was generated through the rental income of furniture and fixtures that the company advertises on its platform. This income grew 2.6X from Rs 19.9 crore it generated from the same during FY18.
The remainder of the operating revenues were earned through subleasing assets and other ancillary fees that the company collects from its customers. These revenues totalled to Rs 56.6 crore in FY19, 3.6X more as compared to Rs 15.6 crore it generated from the same in FY18.
The company has also been working to improve its inventory extensively, adding new products to its catalogue each year as reflected by the purchase of stock in trade which went up by 78% to Rs 43.8 crore in FY19 from Rs 24.6 crore in FY18.
Additions to its inventories were the biggest expenditure in Rentomojo’s cost sheet.
Further, expenses on employee benefits also grew by 97.3% as the company made significant additions to its workforce to manage the increased order volume. To generate more leads, the company spent Rs 13.6 crore on advertising and promotions, 90% up from Rs 7.15 crore it spent on ads during the year ended in March 2018.
Additionally, the income statement also included “Miscellaneous Expenses” worth Rs 13.6 crore, forming a large chunk of the total expenditure and account for expenses such as logistics, warehousing, IT, recruitment, et al.
Channelling growth also came at a price as the total expenditure of RentoMojo ballooned 2.3X to reach Rs 164.4 crore during FY19 as compared to the total expenditure of Rs 72.6 crore that the company incurred in the previous fiscal.
And to fuel these expenses, the company borrowed heavily in absence of any equity rounds during FY19. RentoMojo borrowed Rs 46.6 crore during the year ended in March 2019 and paid dearly for the leveraged capital. Its finance costs escalated drastically to reach Rs 11.64 crore during FY19 in contrast to the expenses of Rs 2.95 crore during FY18.
While the increased spending helped the company spread its customer base, it lost more money as well, akin to any growth-focused startup in the ecosystem. RentoMojo’s losses for FY19 totalled to Rs 54.64 crore, increasing by only 53.3% from Rs 35.6 crore in FY18 which is a feat in itself.
However, the company’s promoters were hastily looking for fresh capital infusion in the company as mounting losses and increased borrowing have eroded the net worth of the company. At the end of FY19, the company’s total liabilities stood at around Rs 112.36 crore, in contrast to total assets worth Rs 107.3 crore resulting in negative equity of Rs 5.06 crore.
This issue was addressed earlier this year in June as the company raised a $15 million round led by Accel & Chiratae and the overall net worth of the company improved.