ShareChat posts operating revenue for the first time in FY20; outstanding losses cross Rs 1,253 Cr

The fiscal ended in March 2020 was the first year in which six-year-old social media startup Sharechat collected operating revenues. The company which is backed by social media giant Twitter earned around Rs 9.4 crore from its operations during FY20.

Around 95.1% of this revenue was earned through the sale of advertisement space on the ShareChat platform billed on the basis of views and impressions.

The rest 4.1% was collections of its social commerce platform — Elanic — which was acquired in February last year. Elanic collected this income by providing services such as order processing, collection of payment, delivery of goods, processing returns and handling customer service. ShareChat did not book any revenues through its gaming platform during FY20.

Another Rs 28.7 crore was earned on the financial assets, pushing ShareChat’s topline to Rs 38.12 crore in FY20.

The social media startup is heavily funded, with no dearth of capital at hand. It is burning through cash to expand its platform and reach a bigger audience base. ShareChat’s annual expenditure went up by 23% from Rs 581.5 crore to nearly Rs 715 crore in FY20. It spent Rs 76.06 to earn a rupee of revenue during FY20.

Going through the expense sheet, we see costs relating to marketing and business development were the largest cost centre for the company with such payments making up 46% of the total costs during FY20. These expenses grew by around 7% YoY and amounted to Rs 329.4 crore in FY20.

With its gaming and content platforms picking up steam towards the end of FY20, the company ramped up its hiring operations to increase its talent base. It spent Rs 80.25 crore on costs related to employee benefits in FY20 which grew 2.7X as compared to Rs 29.3 crore paid out in FY19. Another Rs 2.5 crore was spent during FY20 on recruitment-related expenses.

Server rent costs also shot up 2.7X to Rs 188 crore in FY20 from Rs 70.8 crore spent on the same in FY19 as more users joined its platform and created more content. Analytics and communication expenses grew by 65.7% to Rs 26 crore during the same period.

Legal and professional expenses ballooned 4X to Rs 14.8 crore from the expenses of Rs 3.7 crore incurred in FY19.

Another Rs 4.65 crore was paid out to contractual employees as net cash outflows grew by 60.3% to Rs 684.6 crore in FY20 from outflows of Rs 426.95 crore in FY19.

ShareChat has managed to monetise its userbase during FY20 but it's still in the middle of building a platform for its users which involves a lot of spending on the consumer acquisition. Its losses have increased by nearly 22% to Rs 676.85 crore in FY20 from the losses of Rs 555.82 crore in FY19.

There is a little upside as EBITDA has improved from -2167% in FY19 to 1759.77% in FY20, but the company will have to work toward bringing these negative margins to a more sustainable level.