DealShare is a classic case for storied investors like Alphawave, which placed bets on the startup by investing double to triple digit million dollars, that things can turn south despite ticking all the boxes: pedigree of founders, market size (smaller cities) and potential, among others.
Struggles with product market fit (PMF) had a strong impact on the financial performance in FY23 — Dealshare’s gross revenue (aka GMV) barely grew by 5.4% to Rs 1,963.5 crore in FY23 as compared to Rs 1,863.6 crore in FY22, its consolidated financial statements sourced from the Registrar of Companies show.
Dealshare’s majority of revenue comes from the sale of grocery items which stood at Rs 1,957.5 crore during the fiscal year ending March 2023 while the remaining Rs 6 crore came from marketing services. It also earned Rs 91.3 crore via interest and gains on financial assets during FY23 which took its overall revenue to Rs 2,054.9 crore.
Head to TheKredible for complete expense breakdown and year-on-year financial performance.
The company had a complex model which involves consumer and business centric fulfillment until management overhaul in the past year. Over the past few quarters, it has shifted focus to a B2C model.
Including the discounts and sales return, DealShare’s revenue (from sale of grocery products) stood at Rs 2,180.4 crore. It offered a discount of Rs 113.5 crore on this while also incurred sales return worth Rs 109.4 crore during the last fiscal year.
Now, let’s take a look at the expense break up of the company. DealShare engaged in wholesale trade of grocery products which led to the cost of procurement of goods as the single largest cost center – forming 81.3% of the overall expenditure. This cost went up 5.6% to Rs 2,079.9 crore in FY23 from Rs 1,969.8 crore in FY22.
- Procurement of goods
- Employee benefits
- Manpower cost
- Selling and distribution
Employee benefits expenses spiked over 85% to Rs 219.2 crore in FY23 from Rs 118.3 crore in FY22. This also includes an ESOP expenditure of Rs 58.7 crore in FY23 and Rs 22.98 crore in FY22.
Followed by the spending on freight, logistics, transport, manpower, selling and distribution expenses, Dealshare’s total cost increased 9.3% to Rs 2,557.6 crore during FY23 as compared to Rs 2,340.3 crore in FY22.
At the end, its losses increased 14.1% to Rs 502.7 crore during FY23 against Rs 440.7 crore in FY22. Moreover, the company’s outstanding losses mounted to Rs 1,043 crore at the end of last financial year.
Operating cash outflows of the company shrank 5.2% to Rs 477 crore in FY23. On a unit level, DealShare spent Rs 1.3 to earn a rupee of operating income during FY23. EBITDA margin and ROCE of the company worsened to -22.25% and -32.18%, respectively, in FY23.
|Expense/₹ of Op Revenue
DealShare has had a turbulent 2023 – whether it was exits of three co-founders including CEO Vineet Rao, mass layoffs or deserting the core B2B business.
Soon after becoming a unicorn in January 2022, it raised another $45 million at a valuation of $1.7 billion. In July 2023, Rao left the company and recently Kamaldeep Singh was elevated to the post of chief executive officer.
To date, DealShare has raised $393 million from marquee investors like Tiger Global, ADIA, Alpha Wave, and Kora Investment, among others.
That said, the company has been struggling to find a clearer route to improve margins, and evidently far from delivering on the kind of premises that attracted above-mentioned investors. New management, albeit late in the fiscal year 2024, may bring about a much-needed reset but has a daunting task of turning things around. The current calendar year might well be make or break for this struggling unicorn.