Bike Bazaar has emerged as a significant two-wheeler financing and e-commerce platform in India and this could be noticed from its scale which grew 3X in the two fiscal years (FY21 and 22).
Bike Bazaar’s gross revenue grew 76.5% to Rs 149.72 crore in FY22 from Rs 84.84 crore in FY21, according to its consolidated financial statements with the Registrar of Companies (RoC).
For context, the firm posted Rs 50.6 crore revenue in FY20.
Bike Bazaar enables buy, sell and finance services for used two-wheelers (electric and petrol variants). Financing is where the company makes most of its money. Interest received on loans formed 71.6% of the total operating revenue. This income surged 64.6% to Rs 107.16 crore in FY22 from Rs 65.11 crore in FY21.
Sales of used (pre-owned) two-wheelers contributed just 7.2% of the collections which surged 2.5X to Rs 10.84 crore in FY22. The company also charges processing and servicing fees on disbursement of loans and collection from this vertical jumped 2X to Rs 31.72 crore in FY22 from Rs 15.5 crore in FY21.
It also made Rs 2.05 crore from the gain on the sale of current investments which grew 7.3% during FY22.
On the cost side, employee benefits accounted for 31.2% of the overall expenses and surged 44.8% to Rs 64.59 crore in FY22. It also includes Rs 1.46 crore as ESOP (non-cash) expenses.
Interest cost increased 73% to Rs 63.21 crore in FY22 and constituted 30.5% of the total expenditure. The company booked an amount of Rs 13.72 crore against loan write-off. Collection charges ballooned 2.77X to Rs 11.29 crore and incurred Rs 9.85 crore on commission and brokerage paid to agents during FY22.
Bike Bazaar purchased pre-owned vehicles of around 10 crores during the year while the cost of advertising-promotion and call center-information technology cost grew 512% and 30.1% respectively to Rs 7.17 crore and Rs 7.69 crore. In the end, its overall expenditure increased 54.6% to Rs 207.01 crore in FY22.
Bike Bazaar managed to keep a tab on expenses and its losses grew only 17.7% to Rs 55.3 crore during FY22 from Rs 47 crore in FY21.
Its ROCE and EBITDA margin stood at -26.63% and -34.60% during FY22. On a unit level, it spent Rs 1.38 to earn a single rupee.
While Bike Bazaar’s momentum would indicate break even is not too far off, the financial space is also evolving at a hectic pace, when it comes to two wheeler loans. Focusing on the pre-owned vehicle market certainly narrows it down as far as competition from large organised players goes, but it comes with its own added risks as we see in the write offs column. Managing the risk return trade off in the two wheeler segment in particular will be a challenge, as the perceived asset value drops very sharply after the second sale. To that extent, these loans are just a step better than unsecured loans. Electric two wheelers of course offer many more ways to build a stronger connection with the borrower, possibly by adding a battery swapping service, warranty, or even replacement offer in the deal. Firms like Bike Bazaar will be at the forefront of discovering what works, and what didn’t, in this new market. They will just be hoping that the former happens at scale, and the latter can be discovered and dropped equally fast.