Mohalla Tech, the parent entity of the vernacular social media platform ShareChat and short video entertainment app Moj, raised $255 million from Google, Times Group, and Temasek during FY23. The substantial funding helped the company scale its business during the said period. But, rising expenses continue to weigh down prospects for the company.
ShareChat’s revenue from operations increased 59.4% to Rs 533 crore in FY23 from Rs 347 crore in FY22, according to its consolidated financial statements filed with the Registrar of Companies.
‘ShareChat Coin’, the in-app virtual currency, purchases for its chat rooms overtook its advertisement income to form 52% of the total revenue. This income surged 2.3X to Rs 285 crore in FY23 from Rs 121 crore in FY22.
The rest of the income came from the advertisement business and its online fantasy sports platform Jeet 11. It’s worth highlighting that ShareChat shut down Jeet 11 in December 2022 as it failed to take off.
See TheKredible for the revenue breakdown of all segments.
Being a social media platform, server expense was the largest cost center, and it accounted for 26% of the overall expenditure. This cost grew by 21% to Rs 1,022 crore in FY23 from Rs 845 crore in FY22. Surprisingly, spending on business promotion declined by 50.7% to Rs 564 crore in FY23.
- Employee benefit expense
- Server rent
- Content development
- Business development
- Analytics and other tools
- Provision for doubtful assets
Its employee benefits, content development, analytics & tools, legal cum professional fees, finance cost, and other overheads pushed the total expenditure 16.2% to Rs 3,959 crore in FY23 from Rs 3,408 crore in FY22.
Check TheKredible for the detailed expense allocation.
Caveat 1: We have excluded the cost of Rs 1,903 crore against the amortization of intangible assets (non-cash) while calculating the expenses. This is due to writing off the balance in optionally convertible debentures for MX TakaTak.
|Expense/₹ of Op Revenue||₹9.82||₹7.16|
The 59% growth in scale helped the firm keep losses in check. It recorded a nominal 8.4% increase in its losses at Rs 3,241 crore in FY23 as compared to Rs 2,989 crore in FY22. Its ROCE and EBITDA margin stood at -502% and -401% respectively.
Caveat2: The total expenses include another Rs 881 crore as non-cash cost which includes foreign exchange losses, provision of doubtful assets, ESOP cost, and interest cost on debenture (which will be converted into equity). If we exclude the same the losses will come down to Rs 2,360 crore in FY22.
On a unit level, it spent Rs 7.16 to earn a rupee of operating revenue. This is one of the highest expense-to-revenue ratios for a unicorn in FY23.
The company has a total current assets of Rs 1,195 crore which includes cash and bank balances and current financial assets.
As mentioned above, ShareChat raised $255 million in a new round from Google, Times Group and Temasek at a valuation of $5 billion.
However, things appear to have not gone very well for the company as it fired more than 500 employees during the last quarter of FY23. Soon after the layoffs, ShareChat’s two co-founders, Bhanu Pratap Singh and Farid Ahsan stepped down from their active roles in the social media company. The duo recently started their new venture called General Autonomy with a $3 million fundraise.
Meanwhile, ShareChat is reportedly looking for a bridge round to the tune of $50 million at a 55% haircut in its valuation.
According to TheKredible, the company has raised around $1.8 billion from investors including Twitter (now X), Alkeon Capital, Moore Strategic Ventures, and Tencent, among others.
The end is nigh, or should be for ShareChat. Years after it first launched in 2015, the social media platform has failed to deliver, and spectacularly at that. Yes, building a social media platform at scale costs money upfront, and Sharechat certainly cannot quibble that it didn’t get enough of that. The fact is that the firm has done more to create doubts about whatever little it has achieved, especially the alleged audience reach and engagement than any doubter could. If the failure to monetise this massive ‘audience’ could be passed off as an acquisition phase, the move into gaming and what seems like a very clumsy attempt to monetise raging hormones of its young user base with the chat tokens, is desperation. By throwing multiples of money for every rupee of revenue, one seriously doesn’t know if even these are real or not. Sustainable, they certainly are not.
Disclaimer: We have updated the story at 12:14 to include Caveat2