B2B retail tech platform Arzooo had recently cornered $70 million in its Series B round at a valuation of over $400 million. The company’s valuation jumped about 12.8X in the new round as it was valued at $32 million during the Series A round, as per Fintrackr’s estimates.
Arzooo’s spike in valuation has come on the back of its scale that has expanded 22.5% to Rs 258.73 crore in FY21 from Rs 211.16 crore in the previous fiscal year (FY20), per the company’s annual financial statements filed with the RoC.
Sale of products was the major source of revenue for Arzooo, contributing 99.5% of the total operating revenue. The company also made a nominal income (Rs 1.28 crore) from after sale services including insurance and extended warranty.
For context, Arzooo is a real-time reverse auction-based e-commerce platform for electric and home appliances such as refrigerators, air conditioners and televisions among others. It was launched by former Flipkart executives – Khushnud Khan and Rishi Raj Rathore – to help offline retailers compete with e-commerce giants. It claims to power over 30,000 retailers allowing them to scale without holding extensive inventory.
On the lines of income, the total cost of the company increased 29.3% to Rs 277 crore in FY21 from Rs 214.3 crore in FY20. Arzooo enables inventory for partner stores and the cost of procuring materials emerged as the largest cost center constituting 91% of the overall cost. This cost grew 23% to Rs 252 crore in FY21 from Rs 205 crore in the previous fiscal year or FY20.
Employee benefits expense was another major expense for Arzooo followed by the cost of materials which increased 173.2% to Rs 12.62 crore in FY21 from Rs 4.62 crore in FY20. The company spent another 1.35 crore on legal and professional services pushing the total cost to Rs 277 crore in FY21.
Arzooo’s expenses outpaced its revenue resulting in a 5.7X spike in losses which rose to Rs 17.96 crore in FY21 from Rs 3.12 crore in FY20. On a unit level, the company spent Rs 1.07 to earn a single unit of operating revenue.
While the extra ‘O’ in the name might have come because of the fact that Arzooo was taken by Sabeer Bhatia of Hotmail fame, the firm’s last round and valuation indicates that it is no handicap at all. Its positioning in the large electronics sector with enough of a runway to grow yet, and the possibilities of going beyond at some stage, are probably what will decide how quickly this firm hits unicorn valuations. And with the company now looking to expand its retail platform to the south Asian markets after the latest round, its expenses are bound to rise further.