Freecharge scale grows 12.5X since its acquisition by Axis Bank

Freecharge seems to have had a significant turnaround under the Axis Bank umbrella in the last five years. The third-largest private bank acquired Freecharge in FY18 when the latter had an income of Rs 23 crore and Rs 81 crore loss. But over the years, Freecharge’s scale has spiked 12.5X since then, all the while making some profit.

Freecharge’s operating revenue grew 23.2% to Rs 287 crore during the financial year ending March 2022, as per the company’s annual financial statements with the Registrar of Companies (RoC).

Business support fees collected for providing financial and customer acquisition services to Axis Bank found to be the largest source of revenue during FY22 forming 63.4% of the total operating revenue. These collections soared almost 3X to Rs 182 crore in FY22 from Rs 63 crore in FY21.

Collections from providing services in relation to the development and management of technology products for the parent entity booked as TSP (technology service provider) declined 11.8% to Rs 65.61 crore in FY22 and accounted for 23% of the total operating revenue. The company also collected commission (charged from merchants as checkout fees) of Rs 26.3 crore in the last fiscal which surged 64.5% from Rs 16 crore in FY21.

Importantly, revenue from wallet maintenance stood nil during FY22 as compared to Rs 78.72 crore generated from the same in FY21. This revenue has become zero as the firm made it free for users in FY22.

Freecharge provides mobile recharge, bill payments, FASTag, OTT and loan repayment services along with pay later UPI, instant loans, and investment options like mutual funds, digital gold, and fixed deposit. It recently partnered with Cashfree Payments to facilitate its users with Buy Now Pay Later (BNPL) services up to Rs 10,000.

Moving to the expense side, employee benefits expense was the largest cost center for the company contributing nearly 42% to the annual expenditure. This cost increased 16.4% to Rs 108.54 crore in FY22.

Advertising and promotion emerged as the second largest expense which spiked 62% to Rs 49.4 crore in FY22. Other major cost elements such as legal-professional and software expenses surged 352% and 20% to Rs 17.64 crore and Rs 12.85 crore respectively during FY22.

During FY22, Freecharge’s total expenditure spiked by 40.8% to Rs 259 crore as compared to Rs 184 crore in FY21.

Unlike its income, Freecharge’s expenses surged at a higher pace which caused a 38% drop in its profits to Rs 22.6 crore in FY22. Its EBITDA margin and ROCE deteriorated to 13.92% and 12.78% in FY22. On a unit level, the firm spent Rs 0.9 to earn a rupee of operating revenue in FY22.

Axis Bank acquired Freecharge from Snapdeal in a Rs 385 crore ($60 million) deal in July 2017. Before that, Freecharge’s original founders Kunal Shah and Sandeep Tandon sold the wallet platform to Snapdeal for about Rs 3,000 crore ($400 million) in April 2015.