Furlenco revenue stagnates in FY21, losses widen

The Pandemic’s impact during FY21 on new economy-focused rental companies was no exception. It was a tough period, and the numbers for Furlenco bear this out. Zoomcar and Bounce’s collections also suffered a 73% and 83% loss respectively in FY21.

While a major chunk of rental companies across furniture, appliances and vehicles had experienced a significant loss in scale in FY21, furniture and home decor rental platform Furlenco seems to have weathered the storm relatively better. The company’s operating revenue saw a slight decrease of 6.3% to Rs 84.3 crore in FY21 from nearly Rs 90 crore in the previous fiscal year (FY20), according to its annual financial statement with RoC.

Furlenco’s entire collections came through renting furniture, home decor items and appliances. The Bengaluru-based company also made Rs 3.7 crore during the fiscal year ending March 2021 from the disposal of its demolished tangible assets and interest on fixed deposits which surged 48% from Rs 2.5 crore in FY20.

When it comes to expenses, employee benefit expenses emerged as the largest cost center accounting for 20.8% of the company’s annual cost. However, this cost shrank 8.1% to Rs 36.5 crore in FY21 from Rs 39.7 crore in FY20 and includes Rs 3.56 crore as employee stock options (ESOPs) expenses.

Furlenco had taken warehouses, office premises, plant and machinery on lease which formed 15.5% of its total expenditure. This cost surged 28.5% to Rs 27.2 crore in FY21 from Rs 21.17 crore in FY20.

Given that Furlenco is an asset-heavy business and its scale shrank in FY21, cost of depreciation took a dip of 7.9% which stood at Rs 26.82 crore in FY21.

Being a highly leveraged company, Furlenco has to pay interest to financial institutions and on debentures issued by it. These costs grew 20.4% YOY to Rs 21.21 crore in FY21 from Rs 17.62 crore in FY20.

The rental business requires a robust legal team which involves contract underwriting and default among others. This could also be evident from the company’s expense on the legal and professional costs which accounted for 9.1% of the annual cost and grew 2.4X YOY to Rs 15.9 crore in FY21.

In line with its scale, Furlenco’s cost of advertisement and promotion was also reduced by 5.8% to Rs 8.32 crore in FY21.

Cost of contract labour charges (delivery, installations, logistics et al) of Rs 7.91 crore pushed the company’s total annual cost to Rs 175.53 crore during FY21 as compared to Rs 174 crore in FY20.

The expenses of the company were more than double its operating revenue during FY21 and its losses grew 7.4% to Rs 87.57 crore in FY21 from Rs 81.53 crore in FY20. On a unit level, Furlenco spent Rs 2.08 to earn a single unit of operating revenue.

A decrease in trade receivables was a major reason that pushed cash outflows to Rs 88 crore in FY21 where figures stood at Rs 19 crore in the previous fiscal year (FY20).

Founded by former Goldman Sachs and Morgan Stanley executive Ajith Mohan Karimpana, Furlenco has raised around $250 million across equity and debt rounds from the likes of Lightbox, Eudora Ventures, Eagle Holdings, Zinnia Global Fund and CE-Ventures.

The company, which counts Rentomojo and Rentickle as its direct competitors, was also in the headlines for laying off around 180 employees in March.

While FY22 numbers should come in soon one hopes, the fact remains that in a new business environment of costlier money, the firm needs to tighten up its operating metrics, especially receivables and other costs further. With a large enough user base, by now the firm really should be clearer about its strengths and be able to build on those and derive value accordingly, as existing margins are clearly unsustainable.