Security and community management platform MyGate had a bittersweet FY20, marked by an increase in revenues but also a significant increase in net losses. While growth in scale was apparent, the company burned through a large chunk of growth capital to achieve it.
MyGate’s operational revenue grew by 164.7% from Rs 5.83 crore in FY19 to Rs 15.43 crore during the fiscal ended in March 2020. The company also earned another Rs 7.6 crore from its financial assets during the same period.
However, at the same time, the Bengaluru-based company saw its losses balloon more than 126% from Rs 25.3 crore in FY19 to Rs 56.6 crore in FY20, marked by a significant increase in expenses. EBITDA margin saw a slight improvement and stood at -240% in FY20 as compared to margin of -285% during FY19.
MyGate had secured $56 million in Series B round from Tencent and Tiger Global at the end of FY20. This was the largest funding round for any startup operating in the society and community management space.
“The increase in the revenue is attributable to onboarding of more number of customers (Viz., Resident Welfare Associations, FM Companies, etc.) on our Security & Community Management Solutions, which lead to increase in the topline for FY 20,” Vijay Kumar Arisetty, the company’s co-founder and CEO told Entrackr.
Employee benefits expenditure was the biggest cost centre for MyGate in FY20
MyGate saw its total employee benefits expenses shoot up by 144% in FY20 to Rs 49.88 crore compared to the previous fiscal.
Further, the cost of materials consumed also grew by 88.2% to Rs 11.01 crore during FY20 from Rs 5.85 crore during FY19. “Cost of Materials includes mobile & connectivity charges incurred by us to render our services,” Arisetty clarified to us.
Rental expenses paid out during this pre-Covid fiscal also blew up 4.1 times to Rs 3.73 crore in FY20.
During FY20, legal and professional fees paid out by MyGate jumped 4.6 times to Rs 5.8 crore, and advertising and promotional expenses grew by 180.8% to Rs 3.65 crore during the same period.
The company spent Rs 79.6 crore in total during FY20, registering a 146.4% jump in annual costs which stood at Rs 32.3 crore during FY19. MyGate spent Rs 5.16 to earn a single rupee of operating revenue during FY20.
MyGate has asked hundreds of its employees to quit over the last few months
The company has also let go of hundreds of its employees across branches starting from May when the country was being devastated by the ravaging second wave of the coronavirus crisis, multiple people impacted by the company’s decision told Entrackr.
Five former employees of the company who were asked to resign after April told us that the company has let go of anywhere between 500-700 employees across multiple branches, citing poor performance.
However, in response to Entrackr’s detailed questionnaire sent on Thursday, Arisetty refuted claims made by these people.
“We have a bi-annual performance appraisal cycle; one in April and one in October. As part of the April cycle, 10% of our team (~120 individuals) was impacted across verticals and geographies,” Arisetty told Entrackr. He added that since October 2020, the company has hired over 600 people and is in the process of hiring 150 more.
The people that we spoke to also said that they were asked to resign without formal written notice. However, according to Arisetty, people who were impacted were duly informed as per their employment agreement. MyGate did not clarify whether or not it had sent a written notice to impacted employees.
Update: We have updated the figures of employee benefit expenses and managerial remuneration after the company communicated that there were mistakes in the company’s annual filings submitted with RoC. And have added responses from the company about its key revenue drivers and cost of materials.