Industrial goods and services procurement platform OfBusiness became the 18th startup to reach the unicorn milestone earlier this year after raising $360 million in successive rounds led by Softbank and Tiger Global within a span of 2 months.
That makes it one of a handful of startups among the 39 that became unicorns this year. While it has doubled its operating income, profit has surged 72% during fiscal ending March 2021.
The Delhi-based company has recently filed its financial results for the last fiscal and we have sifted through the numbers to understand how the company increased its profits during the covid marred fiscal.
OfBusiness’s operating revenue grew 2X to Rs 1,748 crore in FY21 as compared to around Rs 850 crore in FY20. Around 85.47% of this income came via sale of industrial goods and raw materials. Its sales have ballooned 2.2X to Rs 1,494.1 crore in FY21 as compared to Rs 665.6 crore in FY20.
OfBusiness also provides credit lines for the buyers on its platform and it has generated 12.5% of its revenue from financial services. Such income grew by 33.7% to Rs 219.3 crore during FY21 as compared to Rs 164 crore in FY20.
Contractual and other related operating income also increased by 70.4% YoY to Rs 34.6 crore during FY21.
Purchase of industrial goods and raw materials including construction material, chemicals and agro produce have emerged as the largest cost centres, making up 86.4% of OfBusiness’s total expenses in FY21.
Costs of industrial goods and materials grew in line with sales and amounted to Rs 1,451.1 crore during FY21, 124.7% more as compared to Rs 645.7 crore in the previous fiscal (FY20).
Since OfBusiness also provided credit line services to its clients, finance cost is the second largest cost incurred by the six-year-old firm. Such costs grew by 47.4% YoY to Rs 99.8 crore which constitutes nearly 6% of expenditure in FY21.
As the operational scale doubled during FY21, so did the order flow on the B2B procurement platform and as a result transportation costs also grew by 94.3% YoY to Rs 17.1 crore.
Overall, the company’s total expenditure doubled to Rs 1,680 crore during FY21 as compared to Rs 815 crore in the preceding fiscal (FY20). On a unit level, OfBusiness spent Rs 0.96 to make a rupee during FY21.
Even during the fiscal year affected by supply chain disruptions and lockdowns, OfBusiness has managed to reduce its average age of inventory by nearly 20% from 127 days in FY20 to 102 days in FY21. Annual profits have also surged by 72.4% to Rs 55.7 crore in FY21 from Rs 32.3 crore in FY20.
A 2X surge in its revenue with over 72% increase in profit sets OfBusiness apart from other unicorns. Interestingly, another rival in the infrastructure supplies business, Infra.Market was also profitable in FY21 with a 3.5X jump in its operating revenue to Rs 1,243 crore.
The success of both these startups in terms of being profitable points to both the size of the opportunity and the need to have a disciplined approach to market share gains. The favoured startup moves like discounts or other cuts won’t work here, as the market is simply too large to make an impact with those meaningfully. It is the old fashioned virtues of more efficient and dependable deliveries, quality of products and other support services that are working.