Smallcase goes big with 5.3X growth in scale during FY21

Wealth management company Smallcase has grown at a rapid pace in the past two years. Its operating income spiked 5.3X to Rs 11.4 crore during the fiscal ending in 2021 from Rs 2.14 crore the previous year.

About half of Smallcase’s income—Rs 5.65 crore—has come from transaction fees. This revenue grew 5.18X in FY21. The company charges transaction fees from users every time they buy a handpicked group of model, theme-based stock portfolios.

The company’s income from subscriptions also ballooned 5.27X to Rs 4.11 crore in FY21 from Rs 78 lakh in FY20. Subscription fees comprise 30.8% of the income while service, referral and one-time integration fees made small contributions to Smallcase’s annual revenue.

Apart from operating revenue, the company also earned interest on bank deposits and profit on the sale of mutual funds which went down 22.8% to Rs 1.93 crore in FY21 from Rs 2.5 crore in FY20.

While Smallcase’s revenue grew over 5X in FY21, its expenses grew only 44% to Rs 40.64 crore in the last fiscal from Rs 28.26 crore in FY20.

With 58% of the total expenses in FY21, employee benefits remained the largest expense booked by Smallcase. This cost shot up 30% to Rs 23.52 crore in FY21 from Rs 18.05 crore in FY20. It’s worth noting that this expense also includes employee stock options (ESOPs) based compensation cost which stood at Rs 2.33 crore in FY21.

Spends on marketing and promotions were the second major expense by the company followed by employee benefits which grew 81% to Rs 9.79 crore in the last fiscal year from Rs 5.42 crore in FY20.

Information technology, software licensing and professional fees also collectively cost Rs 4.46 crore in FY21 from Rs 2 crore in FY20.

With the increase in expenses, the cash outflow of the company grew 521% to Rs 37.42 crore in the last fiscal year from Rs 6.02 crore in FY20.

Since the Amazon-backed company has controlled the overall growth in expenses, its losses increased only 16% to Rs 28.26 crore in FY21 from Rs 24.25 crore in the preceding financial year. On a unit level, Smallcase spent Rs 3.56 to earn a single unit of operating revenue.

Equity investment platforms have seen tremendous growth in the past two years on the back of the pandemic and interest of the millennial class. All liked by a rising stock market that has taken retail participation and ownership to new highs. As a result, India has seen the rise of platforms like Zerodha, Groww, INDmoney, Smallcase and Upstox. 

Besides Zerodha, every other venture-backed player is bleeding money in the segment but Smallcase’s growth in scale is notable because it did this even as it seems to be getting a handle on its expenses. However, the 2016 born firm still seems to be some distance from profitability.