Personal hygiene and self care brand Soothe Healthcare raised Rs 175 crore in October 2022 and its growth seems to have driven investors’ money. The company managed a 4.3X growth in its revenue in the last two fiscal years (FY21 and FY22). Investors will be hoping their money can add further wings to the impressive growth rate.
The operating income for Soothe Healthcare grew 76.5% to Rs 139.4 crore in FY22 from Rs 79 crore in FY21, according to its consolidated financial statements with the Registrar of Companies (RoC).
The Delhi-based firm runs a clutch of hygiene and self care brands under the brand names Paree, Baby Bear and Super Liife. Its brand portfolio consists of sanitary pads, hair removal creams, razors, adult and baby diapers and baby care products. Sales of these products were the only source of operating revenue in FY22.
Importantly, the company distributed their products under schemes and samples which amounted to Rs 41.8 crore. That is clearly not a long term proposition, as costs here are likely to be well over revenues.
On the expenses side, the cost of procurement of materials turned out to be the largest cost center for Soothe Healthcare, forming 51.6% of the overall expenditure. This cost grew 112.5% to Rs 114.3 crore in FY22.
Employee benefit was the next expense in line which increased over 50% to Rs 33.67 crore during the fiscal year ending March 2022.
Sales, marketing and transportation costs for Soothe spiked 2.41X and 2.04X respectively to Rs 25.3 crore and Rs 10 crore during FY22. At the end, its overall cost rose 93.8% to Rs 221.3 crore in the last fiscal.
Outpacing its revenue growth, Soothe Healthcare’s losses shot up 2.32X to Rs 81 crore in FY22 from Rs 34.9 crore in FY21. Poor bottomline also impacted cash outflow from operations which rose 3.33X to Rs 100 crore in the last fiscal year (FY22).
Its ROCE and EBITDA margin stood at -115.14% and -49.61%. On a unit level, Soothe spent Rs 1.59 to earn a single rupee in FY22.
Soothe healthcare, to its credit has picked up some very tough segments to operate in, where brands are very strong, and issues like quality as well as safety paramount. That makes breaking in for new entrants tough, which explains the high marketing and distribution costs. While margins in categories like baby care products can be very high, it is precisely why entrenched firms have built strong barriers successfully. It remains to be seen how the script plays out for Soothe Healthcare. One thing is for sure, there is no tried and tested approach anymore.