Stanza Living spends Rs 572 Cr to earn Rs 115 Cr in FY22

Managed accommodation provider Stanza Living saw its scale shrink 44% during the pandemic hit fiscal year (FY21), but the company has made a stupendous return in FY22 with a roughly three-fold growth in its revenue.

Stanza Living’s revenue from operations grew 2.9X to Rs 115 crore during the fiscal year ending March 2022 in contrast to Rs 39.7 crore in FY21, according to its annual financial statement with the Registrar of Companies (RoC).

The company generates revenue by providing accommodation services including other ancillary services. Rental accommodation accounted for 63.7% of its total operating revenue. These collections surged 2.6X to Rs 73.3 crore in FY22 from Rs 28.5 crore.

Stanza Living also provides services such as food, housekeeping, security and other amenities which formed 30% of the revenue and ballooned 3.7X to Rs 34.6 crore during the last fiscal. It also cornered Rs 7.25 crore as annual maintenance charges.

Besides its operating revenue, Stanza Living also earned Rs 39.9 crore as interest on fixed deposits, and current investments et al which steered its total revenue to Rs 155 crore in FY22.

Stanza Living is a full-stack co-living destination for students, working professionals, and migrants. As per its website, it has an inventory of over 70,000 beds across 24 cities in India.

In June 2022, the company also made its entry into the managed apartment segment and launched its customized apartments in six cities - Delhi, NCR (Gurugram), Bangalore, Hyderabad, Pune, and Chennai. It plans to grow this new portfolio to 1.2 million rooms by 2026.

Heading towards expenses, employee benefits stood as the lead cost and formed 39% of the total expenses. To support its growth, Stanza hired more resources, as a result these expenses shot up 3X to Rs 223.8 crore in FY22 from Rs 74.7 crore in FY21. Importantly, this cost also includes ESOP expense of Rs 76.9 crore which was settled in equity.

Depreciation and amortization was another major cost that increased around 33% to Rs 108 crore in FY22. The co-living startup leases out its properties from the owners and finances its leases from financial institutions and its finance cost surged 30% to Rs 79.5 crore during the year.

Spends on selling and marketing jumped nearly 3X to Rs 22 crore during FY22 whereas utility costs such as rent, repairs, electricity,  safety and security expenses stood at Rs 31 crore. Stanza Living also incurred Rs 66.9 of miscellaneous expenses which are likely to include catering, laundry, housekeeping, cleaning, and supplies related charges.

In the end, its total expenditure swelled 2X to Rs 572 crore in FY22 as compared to Rs 279 crore in FY21. Cash outflows from operations also blew 2.5X to Rs 213 crore during the last fiscal year.

Stanza spent heavily to grow its scale during the last fiscal year and its losses surged 84.5% to Rs 417 crore against Rs 226 crore in FY21. Significantly, its outstanding losses scrambled to Rs 824.5 crore at the end of FY22.

Coming to ratios, EBITDA margin and ROCE refined to -148.06% and -24.92% during FY22. On a unit level, Stanza spent Rs 5 to earn a rupee of operating income during the same period.

Stanza Living has raised around $220 million (debt + equity) to date and was valued in the range of $470-500 million following its Series D round in April 2021. In April 2022, the Bengaluru-based company acquired Singularity Automation that offers IoT-enabled solutions and products for the managed living space, in an all-cash deal.

Stanza Living competes with the likes of NestAway, Zolo, and Isthara. InvestCorp-backed Zolo’s scale remained flat to Rs 42.8 crore in FY22 however it narrowed losses by 25% to Rs 67.5 crore. On the other hand, NestAway’s scale shrank 36.3% to Rs 57.8 crore in FY22 while its losses surged 44.3% to Rs 94.97 crore.

The high burn rate is a fair warning of the struggle inherent in the student segment. To add to that, the high depreciation and amortization costs indicate a level of asset creation too, which is a little unusual for startups at this stage, unless linked to write off of acquisition costs. For seasoned hospitality sector veterans, the high costs for many of these startups can be a mystery, and at the very least, should be generating some unbelievable word of mouth for the quality of the services. But for all that, spending Rs 5 for every rupee of income is still unsustainable, and perhaps an improvement is around the corner in FY23 itself. If not, Stanza’s backers might just have to regret wasting the immense opportunity of raising a large series D round when the markets were a lot kinder than they will be for some time.