Bootstrapped firm Noise sales crosses Rs 370 Cr in FY21; profits up 78%

After starting out as a mobile accessory company back in 2014, consumer electronics brand Noise pivoted into wearable electronics and personal audio products in 2017 building a bootstrapped profitable company. Noise is the market leader in the smartwatch segment in India and has been growing consistently for the past three financial years. 

On the lines of FY19 and FY20, Noise has grown at a fast pace in FY21 as well. This time it has also posted a significant jump in profit.

Noise has managed to scale its revenue from operations by nearly 140% to Rs 372.7 crore during FY21 from Rs 155.6 crore generated in FY20, its annual financial statement with the RoC show. The company sells around 35 SKUs including smartwatches, wireless earphones and wireless speakers which are listed on e-commerce platforms and its own website. It also generated non-operating income of Rs 1.87 crore from its financial assets during the fiscal ended in March 2021.

Before starting the company, Noise’s co-founder Amit Khatri used to operate a product design house in Hong Kong, Transcend Sourcing Ltd which now acts as the agent for procurement of finished stock in trade (consumer electronics) from China. The cost of procuring the inventories was the largest cost centre for the company accounting for 68.5% of its annual expenditure. These costs surged by 162% to Rs 226.2 crore in FY21 from Rs 86.23 crore spent in FY20 primarily due to increased order volumes.

During FY21, the Gurugram-based company churned out gross margins of  39.3%, dropping from the FY20 margin of 44.58% primarily due to a sharp rise in shipping costs during the fiscal affected by the pandemic.

Noise also ran extensive discount campaigns to push sales during the fiscal year ending March 2021 and the overall cost of discounts given to customers ballooned 5.8X to Rs 22.14 crore during FY21 from only Rs 3.84 crore booked in FY20.

The company also focussed on customer acquisition campaigns to increase its visibility on the internet and resist competition from other audio/wearable brands such as boAt and Tagg as well as existing smartphone giants such as Samsung and the BBK group. Its expenditure on advertising and promotions went up by 142% to Rs 39.31 crore in FY21 from Rs 16.22 crore in FY20. Noise also handed out commissions amounting to Rs 4.34 crore to various selling agents (including e-commerce platforms) during FY21.

Digging further into the expense sheet, we found out that Noise’s employee benefit payments remained flat at around Rs 14.32 crore in FY21 where remuneration to both cofounders accounted for 43.2% of total salaries i.e., Rs 6.18 crore.

Importantly, there were no research and development costs booked by the company, indicating that Noise is seemingly a pure play white label brand, importing finished goods and branding them for customers in India.

Noise also spent another Rs 2.88 crore on professional and legal fees, pushing its total expenditure to Rs 330.2 crore in FY21 from Rs 132.5 crore spent in total during FY20. On a unit level, it spent Rs 0.89 to earn a single rupee of operating revenue in FY21.

While the company has managed to grow its scale significantly, the increased spending on customer acquisition, discounts and cost of procurement is evident from its EBITDA margin which reduced to 9.6% in FY21 from 12.15%. Noise couldn't cash in the economies of scale but the overall quantum of profits grew by 78.8% to Rs 32.89 crore during FY21 from Rs 18.4 crore profits generated in FY20.

Noise’s financial performance has been stellar in FY21 and if the company has maintained the same growth momentum in the last fiscal year, it’s likely to cross the Rs 500 crore revenue mark in FY22. While the company is one-fourth of boAt’s revenue which posted a turnover of Rs 1,511 crore in FY21, Noise’s net profit margin is better than that of boAt's. The company is one of the few bootstrapped companies in India with over Rs 370 crore in sales. However, it requires to reduce dependability on China and set up R&D facilities along with local sourcing and manufacturing capabilities.