B2B e-commerce marketplace Udaan has seen significant growth over the three years of its existence, developing into a full-stack provider offering services such as logistics, marketplace and even offering credit to SMBs.
To understand its explosive growth, we took a deep dive into the company’s Singapore-based parent entity’s financials.
The regulatory filings in Singapore show that even as its revenues soared, the company’s expenses multiplied at a similar pace — an unusual level of cash burn for a business-to-business entity. It spent Rs 849 crore to gain ground in the Indian market and ended up making a loss of around Rs 779.5 crore.
According to the filings, the Bengaluru-based company recorded 14.3X jump in operating revenues to Rs 46.36 crore during FY19 as compared to Rs 3.24 crore in FY18. Around 60% of Udaan’s earnings were generated through the delivery income of Rs 27.7 crore, which grew 12X from the Rs 2.3 crore it made in FY18.
Interestingly, the sale of goods returned as scrap was the second biggest contributor to operating revenue at Rs 10.2 crore.
The company earned another Rs 7.51 crore from cash collection service while advertisements and interest and service fee brought in Rs 78.8 lakh and Rs 16 lakh, respectively during the year ended in March 2019.
Udaan had also ventured into providing credit lines to merchants on its platform. Consequently, it generated interest income of Rs 5 crore on loans and advances given, and another Rs 11 crore on bank deposits. Further, other income through mutual funds added Rs 7.5 crore to the overall income statement.
However, it lost a lot more — Rs 28.3 crore — on bad debts and financial guarantees in FY19.
Expenditure on logistics and cash collection grew by 11X to Rs 254 crore in FY19 from Rs 21.2 crore in FY18 and was the single biggest cost element for the company during the last fiscal.It was followed by money spent on staff costs which grew 13X to Rs 168.8 crore during FY19 from Rs 13 crore spent for the same in FY18.
Curiously, salaries accounted for only Rs 56.8 crore while Rs 106.62 crore was distributed in share-based payments to executives.
The company also hired outsourced manpower for its operations and spent Rs 121.5 crore for their services during FY19. This expense grew by 11X from the previous fiscal.
Rent and office maintenance grew by 27.5X to Rs 45.6 crore during FY19 from Rs 1.6 crore in FY19 while legal expenses added another Rs 26.15 crore to the consolidated expense sheet.
Udaan suffered significant losses due to delivery problems as well. The company wrote off inventory worth Rs 53.5 crore while refunds to buyers grew by a whopping 111.5X from Rs 43.12 lakhs in FY18 to Rs 48.53 crore in FY19.
Depreciation, income tax and finance costs amounted to another Rs 5 crore and pushed the total expenditure to Rs 849.4 crore in FY19, growing almost 13 folds from Rs 66.5 crore in FY18.
The net cash outflow from operations stood at Rs 841.2 crore and the company lost Rs 779.5 crore during the year ended in March 2019, growing 13X from Rs 60.3 crore it lost in FY18. Udaan’s balance sheet sported outstanding losses of Rs 841.2 crore at the end of FY19.
Udaan issued shares and raised Rs 1,600 crore to fuel these expenses while its total assets grew 4.3X to reach Rs 1,484 crore at the end of FY19.
The company holds 68.6% — around Rs 1,018.5 crore of these assets in cash and short-term deposits to maintain a high liquidity position. During FY19, it invested Rs 949 crore in mutual funds and purchased fixed assets (plant & property) worth Rs 32 crore.
The year 2019 turned out to be a momentous year for Udaan as it raised a staggering $586 million in a Series D round from a clutch of blue-chip backers including Tencent, GGV Capital, Altimeter, DST and Lightspeed.
The round has helped Udaan ramp up its lending play, merchant network and logistic capabilities. Unlike others, Udaan is a full-stack platform for retailers that helps with the aforementioned offerings.
Founded in 2016 by former Flipkart executives Sujeet Kumar, Amod Malviya and Vaibhav Gupta, Udaan has been coveted as the fastest unicorn — companies valued at $1 billion or more — in the Indian startup ecosystem.
Udaan’s expenditure on logistics and cash collection have increased by over 1000%, its annual financial report shows. This is a bit alarming but the company is investing in building its supply chain across the country so it could be optimised in the long haul.
Given that the company wrote off inventory worth Rs 53.5 crore and another Rs 49 crore on refunds, it needs to shore up its quality checks and implement efficient forecast of demand to avoid such losses.
And, it is rare to see any B2B firm spend such a large amount of capital to chase scale. But it’s evident since the company has raised over $800 million investment till date. Expenditure for the company is also likely to increase in the ongoing fiscal as it prioritises scale over fundamentals.