Higher losses, slowing growth drag down ToneTag in FY22

Backed by the likes of Amazon, Reliance, and Mastercard, ToneTag registered six-fold growth in its scale during FY21 with nominal loss ~ Rs 20 lakh. However, the growth engine hit a bump in FY22 and its revenue grew only 38.9% while losses widened.

ToneTag is a sound-based contactless payment and authentication solution for businesses. Its technology uses high-frequency sound waves to securely transfer data between devices, allowing users to make payments or authenticate transactions without the need for physical contact or internet connectivity.

License fees for onboarding ToneTag technology, including ToneTag Retail PODs, comprised 55.2% of the total revenue. This collection spiked over three times to Rs 9.47 crore in FY22 from Rs 3 crore in FY21. Meanwhile, income from smart stores declined 17.8% to Rs 7.69 crore during FY22.

Employee benefits, the most significant cost center for the company, accounted for 63.8% of the overall expense. This cost grew by 36.3% to Rs 12.95 crore in FY22 from Rs 9.5 crore in FY21 and also includes Rs 1.99 crore as ESOP expenses.

The cost of material that includes device cost jumped to Rs 1.4 crore while its web hosting charges doubled up to Rs 1.22 crore in FY22, taking the overall expenditure of ToneTag up by 52.7% to Rs 20.29 crore in FY22 from Rs 13.29 crore in FY21.

Outstripping the revenue growth, the firm’s losses swelled to Rs 2.93 crore in FY22 from Rs 20 lakh in FY21. On a unit level, the company spent Rs 1.18 to earn a single unit of operating revenue.

ToneTag has raised a total of Rs 89 crore to date including its Series B round led by Amazon at a post-money valuation of around Rs 300 crore in 2018. Amazon is the largest stakeholder in TongeTag with 13.40% followed by Reliance which commands 11.80%.

Last year, RBI launched a pilot for the retail digital rupee with four banks including IDFC First Bank. ToneTag partnered with IDFC to enable acceptance of digital rupee at merchant outlets.

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