Ustraa operating revenue touched Rs 60 Cr in FY20; losses grew by over 50%

Happily Unmarried is one of the oldest direct to consumer brands. The company used to sell funky goods for millenials such as coffee mugs, ashtrays and accessories until 2015 when it pivoted to become a full-stack grooming brand.

Happily Unmarried’s flagship brand Ustraa constitutes the majority of its business. Ustraa is a beard and hair focused brand that offers a range of products including trimmer, beard oil and other toiletries. 

Three years ago, the company’s co-founder Rajat Tuli had projected that Happily Unmarried revenues will reach Rs 500 crore by 2020. But the claim has fallen short by Rs 440 Crore in FY20. 

Importantly, the company also explored the women’s grooming market under the brand name Happily Unmarried. However, it didn’t work out and this could be one of the reasons for missing the revenue target by a huge margin. 

We will come on this later in the story. Let’s analyse Happily Unmarried financial performance in FY20. 

With a 46.3% growth, Ustraa has recorded revenue from operations of Rs 60 crore in FY20. Around 95.6% of this income was generated through sales of men’s grooming products and the rest 4.4% was earned via the provision of gift wrapping and delivery services. 

Akin to its revenue, Ustraa’s overall cash burn also grew by  47% to Rs 77.6 crore in FY20 from Rs 52.7 crore in FY19.

Promotions and commission cost Rs 34.1 Cr for Ustraa in FY20

Cost of raw materials consumed during the year ending March 2020 accounted for 28% of the total expenditure. These expenses grew by 47% from Rs 14.7 crore in FY19 to Rs 21.6 crore in FY20. On similar lines, employee benefit expenses also grew by nearly 50% to Rs 11.3 crore in FY20.

Sales promotion costs including discounts, advertisement expenses and sales commissions stood out as the single biggest cost factor on the expense sheet, accounting for almost 44% of the total expenditure. Expenses on advertisement & sales commission grew by 64% to Rs 29.11 crore during FY20 from Rs 18 crore spent on the same in FY19.

Further, Ustraa also gave out discounts on its grooming products amounting to nearly Rs 5 crore during FY20, scaling up 2.5X from Rs 2 crore in FY19 and unexplained miscellaneous expenses accounted for another Rs 8 crore during the last fiscal. 

Net operating cash outflow for Ustraa worsened as a product of these mounting costs, growing by 56.5% from Rs 8.7 crore in FY19 to Rs 13.6 crore in FY20. The company spent Rs 1.3 to earn a single rupee of operating revenue during the fiscal ended in March 2020.

While the company managed to scale up operations, it continued to lose money on its sales with an EBITDA margin of -27%. 

Ustraa’s losses and liabilities in FY20

Ustraa’s losses during FY20 grew by 50.4% to Rs 17.6 crore as compared to Rs 11.7 crore in FY19. Outstanding losses mounted to nearly Rs 65 crore at the end FY20, and the company’s total liabilities outweighed its assets by Rs 10.44 crore. The excess leverage along with a continued string of losses each year has caused a complete erosion of net worth of the company.

At the end of FY20, current liabilities stood at Rs 24.07 crore making up nearly 81% of the outside borrowings in the business. Essentially the whole business is financed by short term payables and the company is in dire need of immediate equity infusion. Last fiscal, the company had collected Rs 10.8 crore 

Overall, the financial performance of Ustraa in FY20 clearly reflects that the company’s financial condition was not healthy.The company required an immediate infusion of fresh capital to continue its operations. The Delhi based company has recently raised the much-needed funds, onboarding IIFL Group as an investor whose second seed fund poured in Rs 50 crore in July. Existing backers Wipro and InfoEdge may put in more capital into Ustraa.

A quick comparison between men and women’s grooming market

If we look at men grooming D2C brands in India, it’s largely dominated by four companies: Beardo, Bombay Shaving Company, The Man Company and Ustraa. While Marico acquired Beardo in a deal worth Rs 350 crore, the other three were also backed by strategic investors including Emami, Colgate-Palmolive and Wipro. 

The Indian beauty and personal care market is slated to be worth $22-23 billion in 2022, as per a RedSeer report. Out of which, the share of men's grooming stood at $5.5 billion. This means that women's beauty and grooming is 3X bigger than men.

This could be further validated from the growth of women beauty and grooming platforms. Nykaa had turned profitable in FY19 with a revenue of Rs 1,153 crore while Purple surpassed Rs 100 crore in operational revenue in the same fiscal.

Sugar cosmetic also had crossed Rs 100 crore in revenue in FY19. While these companies are yet to disclose financials for FY20, they are bigger than all men’s focused grooming brands.

Based on their FY19 financials and Fintrackr estimate, none of the men’s grooming brands has reached close to Rs 100 crore revenue in the last fiscal. But the sector is catching up steam, delivering a  double-digit value growth of 12.3% in FY20 as per a Nielsen report.