Cult.fit's losses near Rs 700 Cr in FY22, revenue grows 34%

Health and wellness platform Cult.fit (previously Cure.fit) managed to grow its revenue by more than 34% to Rs 216 crore in FY22. This comes after the Bengaluru-based company’s topline declined from nearly Rs 500 crore in FY20 to Rs 161 crore in FY21 as the covid induced lockdown played havoc with the Mukesh Bansal-led company. But the surge in revenue continues to come at a high cost, with losses following at close to Rs 700 crore.

Cult.fit’s operating revenue grew 34% to Rs 216 crore in FY22, as per the annual financial report filed with the Registrar of Companies (RoC). Fitness vertical is the largest source of revenue for Cult.fit, forming 65.3% of the operating revenue. This revenue jumped 35.6% to Rs 141 crore during the last fiscal year.

Revenue from D2C and healthcare services (via Care.fit and Mind.fit) increased 21X to Rs 63 crore in FY22 while the sale of sports apparel and other products under the brand name of Cult shrank 68% to Rs 12 crore in FY22.

FY22 was the period when Cult.fit scooped up $75 million from Tata Digital and $100 million from foodtech major Zomato to become the 36th unicorn of 2021.

After hiving off its cloud kitchen vertical Eat.fit [under Curefoods], fitness vertical was the sole focus for Cult.fit and it had to shift most of the business online due to restrictions during the lockdown. Even after narrowing down its business, shedding a large number of employees and pivoting to digital, employee benefits expenses emerged as the largest cost center for the Cult.fit constituting around 30% of the overall cost. This expenditure increased 38.4% to Rs 292 crore in FY22, including Rs 69 crore as ESOP expenses.

While Eat.fit is now headed by Cult.fit’s other co-founder Ankit Nagori, the firm has also spun off its Care.fit business into Sugar.fit.

With the fitness-focused model, the cost of procurement of equipment and apparel is the next major cost for Cult.fit which increased 5X to Rs 103 crore in FY22. Spending on advertisement and promotion for the company surged 25.4% to Rs 89 crore in FY22.

The company has lease financing agreements in place for the physical centers it operates and these costs were reduced by 7% YoY to Rs 72 crore in FY22. Currently, Cult.fit has more than 600 facilities of which over 200 centres are operated by the company itself.

Legal professional expenses and IT cost were recorded at Rs 86 crore and Rs 20 crore respectively in FY22 which pushed the overall cost by over 31% to Rs 996 crore during the fiscal year ended March 2022.

Cult.fit has also acquired over a dozen startups in the past couple of years. In 2021 alone, it took over seven startups. Earlier this year, the group picked up a majority stake in F2 Fun & Fitness India Pvt Ltd to become the master franchise partner for Gold’s Gym in India. 

As the expenses of the company were near Rs 1,000 crore, losses spiked 3% to Rs 690 crore in FY22. On a unit level, the company spent Rs 4.61 to earn a single unit of operating revenue.

While Cult.fit has not been able to control its expenses, the firm is reportedly aiming for an Initial Public Offering (IPO) in 12-18 months. The company claims that its core gym business has turned profitable. While future quarters will demonstrate the sustainability of that claim, it is a fact that the firm's costs have been remarkably sticky, even as revenue numbers have been volatile. Industry players in the fitness space we have spoken to earlier have always pointed to challenges in the business model, where being local or hyper-local wins over any sort of common state or national-level strategy according to most. As Cult.fit continues its efforts to prove them wrong, backed by the backing of its investors, it should be interesting to see the progress it finally shows in FY23.