Patna-based agritech firm Dehaat grabbed the headlines in October last year after raising one of the largest funding rounds in the Indian agritech space. The company also emerged as one of the highest valued startups with over $500 million valuation in October. While the outcome of the Series D round on its growth would be known when the company would file FY22 results, the Sequoia-backed startup has managed to scale its operations nearly three folds during FY21.
The ten-year-old startup provides agricultural inputs (seeds, pesticides, fertilizers), agricultural finance, warehousing, cold storage as well as advisory services such as soil testing and yield prediction services. Dehaat currently operates in four states namely Bihar, UP, Odisha, and West Bengal and claims to serve over 650K farmers in its service network.
Dehaat’s revenue from operations surged by 186.2% to Rs 358.3 crore during FY21 from Rs 125.2 crore in FY20, as per its annual statements filed with the Registrar of Companies (RoC). While the company claims to offer a full stack of agricultural services and inputs to farmers, for now, it is clearly a one-trick pony, with the sale of agricultural inputs, especially seeds accounting for 99.2% of Dehaat’s revenue. The sale of agricultural inputs has surged nearly 2.9X to Rs 355.4 crore during FY21 from Rs 123.01 crore in FY20.
Dehaat has benefited from economies of scale and its gross profit on these sales improved from 2.4% in FY20 to 4.42% during FY21. The company also earned Rs 2.9 crore from providing warehousing and other agricultural services and collected non-operating income of Rs 2.64 crore from its financial assets in FY21.
To fulfill demand, Dehaat procures agricultural inputs such as seeds, fertilizers & pesticides from companies like Monsanto, Du Pont, Agrinos and IFFCO among others. The procurement of these stocks in trade is the largest cost centre for the agritech company, accounting for 81.8% of its annual expenditure. Due to increased demand, such costs surged by 183% to Rs 339.7 crore in FY21 from Rs 120.03 crore in FY20.
The company also increased its employee base to fulfill demand and as a result, its employee benefit payments have grown three folds to Rs 29.2 crore during FY21 from Rs 9.3 crore paid out in FY20. The surge in order volume is also evident from the 6X growth in transportation and distribution expenses which amounted to Rs 8.45 crore, growing from Rs 1.4 crore in the preceding financial year.
Another Rs 3.36 crore was spent on rentals, pushing the annual expenditure to Rs 415.1 crore in FY21, growing by 190% as compared to Rs 143.12 crore spent in total during FY20. On a unit level, Dehaat spent Rs 1.16 to earn a single rupee of operating revenue.
With geographical and category wise expansion in focus, Dehaat burned through a lot of cash to increase its scale of operations and as a result, its cash outflow from operations grew nearly 4X to Rs 102.1 crore during FY21 from Rs 25.6 crore in FY20. Annual losses also surged by 203.3% to Rs 54.2 crore during FY21 from Rs 17.87 crore lost in FY20.
Importantly, the auditors have given a qualified opinion on Dehaat’s balance sheet highlighting the inadequate internal controls with regard to the management of inventory. It found material (but not pervasive) issues regarding the control existing in the company which is not operating effectively to prevent, detect and correct misstatements in the financial statements. Perhaps an inevitable risk of operating in the agri space.
Irrespective, the firm will be expected to turn profitable sooner than most startups, considering the incremental nature of improvements it offers and the controlled and predictable pricing environment in its business. As a key torchbearer in the tough agritech space, it will also know that it has no shortage of well-wishers willing it to go higher and farther.
