Point of sales company Mswipe is one of the early and notable players in the digital payments segment. Despite the wide adoption of digital payments, Mswipe hasn’t seen a similar rate of growth in its financial performance in FY20.
Mswipe has recorded 34.6% uptick in operating revenue which grew to Rs 348 crore in FY20 from Rs 258.5 crore in FY19. Unlike revenues, losses ballooned 2.5X to Rs 148.1 crores in FY20 from Rs 58.1 crore in FY19.
Mswipe provides NFC, UPI QR, NFC and PoS based payments options. It recently claimed to be the largest POS acquirer in India with 675,000 POS and 1.1 million QR merchants.
The company has generated 55.7% of its revenue through transaction processing fees and earnings via support services accounted for 33.5% while sign up fees made up for 5.8%. Other related revenues including the sale of products summed up the rest 5% revenue.
Processing fee expenses on transactions stood out as the single biggest cost factor for the PoS company, making up 37.1% of the total expenditure. These expenses rose by 53.2% to Rs 193 crore in FY20 from Rs 126 crore in FY19.
Expenditure on employee benefits also grew by 44% to Rs 111.01 crore from Rs 77.13 crore spent on the same in FY19 and these expenses accounted for 21.3% of the total expenditure. Burn on employee benefits also grew by 44% to Rs 111.01 crore from Rs 77.13 crore spent on the same in FY19.
It’s worth noting here that the Bengaluru-based company outsources a large portion of its support services to third parties on a contractual basis. Such cost rose by nearly 81% to Rs 56.42 crore in FY20 from Rs 31.2 crore in FY19. Further, IT expenses also grew by 65% to Rs 17.65 crore in FY20 and Mswipe spent another Rs 5.6 crore on administration cost during FY20.
Expenditure on advertisement and commission stood at Rs 5.6 crore and along with MQR costs of Rs 4.5 crore pushed the total expenses to Rs 520.2 crore during FY20. Total expenses in the last fiscal registered a 55% jump as compared to total costs of Rs 335.7 crore in FY19.
The high rate of cash burn to scale operations during FY20 wasn’t sustainable. Mswipe’s net cash outflow from operations have shot up nearly four times to Rs 137 crore in FY20 and EBITDA margins have worsened to -23% during FY20.
The gap between revenue and loss growth is large and the nine-year-old firm has to optimise costs in FY21 for sound unit economics. While the company didn’t raise equity capital in FY20, it appears that it is required to raise fresh financing to scale further.
In the past few years, the digital payments space has turned hyper-competitive with the entry of Paytm and BharatPe in the PoS business. Further, the Covid-19 pandemic has hit small and medium merchants severely in the ongoing fiscal. This is likely to impact PoS companies such as Mswipe.
Akin to BharatPe, Mswipe had recently launched zero MDR on its new PoS machines for larger scale. It would be interesting to see how Mswipe’s new initiatives help it to move towards sustainable growth.