PhonePe operating revenue jumps 2X to Rs 372 Cr; losses fall marginally

PhonePe has been steaming ahead with its UPI platform coming forth as a formidable player after processing 868 million transactions worth Rs 1.75 lakh crore during November. The company’s growing scale is also visible from its 2X growth in FY20.

During FY20, the payments firm has managed to double its revenue from operations which grew from Rs 184.2 crore in FY19 to Rs 371.8 crore in FY20.

Around 94.2% of the revenue was collected from payment services, amounting to Rs 350.2 crore in FY20, growing 2.18X from Rs 160.8 crore earned in FY19. The remainder 5.8% was generated from advertising sales which stood at Rs 23.41 crore while another Rs 55.5 crore was earned via financial instruments during FY20.

Moving over to the expense sheet, at 46.14%, advertising costs accounted for the largest share of total expenditure. The Walmart group-owned company trimmed down these expenses by 21.6%, dropping down to Rs 1,016.6 crore in FY20 from Rs 1,296.7 crore in FY19.

PhonePe also reduced its spends on employee benefits by 9.8%, which reduced from Rs 532 crore in FY19 to Rs 480 crore during FY20.

The company invested Rs 284.5 crore during the fiscal ended in March 2020 on acquiring capital assets (including IT Systems and Software) while depreciation and amortization costs witnessed an uptick of 370%, growing from Rs 23.7 crore in FY19 to Rs 87 crore booked in FY20. 

Another Rs 16.2 crore was spent on building rent and repair which grew by 47.3% during FY20. PhonePe outsources a number of operational activities to third parties and fellow Walmart group companies. These outsourced contract service expenses amounted to Rs 208.5 crore in FY20, jumping 3.8X from Rs 54 spent on the same during FY19.

Ancillary payment processing expenditure amounted to Rs 150.1 crore in FY20, growing by 74% as compared to Rs 86.3 crore spent during previous fiscal.

PhonePe’s losses on bad debts and forex transactions ballooned 5X to Rs 48.6 crore during FY20 while licensing and services expenses grew 2.3X to Rs 24.5 crore during the same period. Further customer support costs added Rs 53.5 crore to Phonepe’s total expenditure to Rs 2,276.6 crore during FY20 which grew by only 2.3% YoY.

On the unit level, the company spent Rs 5.93 to earn a single rupee of operating revenue in FY20, improving by nearly 50% as compared to Rs 11.7 spent for the same in FY19

The payments firm’s efforts to control costs paid off and it managed to reduce its annual losses by 7%, which stood at Rs 1,771.7 crore in FY20 as compared to Rs 1,904.7 crore it lost during the previous fiscal. EBITDA margins also improved from -766.3% in FY19 to -395% in FY20.

PhonePe is stuck in a price war with Alphabet’s Google Pay, competing for the top spot on UPI payments charts and it’s turning to be very expensive for the Sameer Nigam-led firm. A significant share of its revenues was booked from services provided to related parties including Flipkart Group companies.

Its net cash outflow from operations has shot up by 32% to Rs2,276.6 crore during FY20 and its balance sheet sported outstanding losses amounting to Rs 4,601.3 crore as on 31 March 2020.