Neobank Open's FY24 revenue drops to Rs 25 Cr, outstanding losses cross Rs 1,800 Cr

Like many of its peers, neo-banking platform Open appears to be struggling to generate substantial revenue, as indicated by its shrinking scale. Despite a 25% rise in scale in FY23, the Bengaluru-based company's scale slipped 17% in the fiscal year ending March 2024. 

Open’s revenue from operations declined to Rs 24.81 crore during FY24 as compared to Rs 29.9 crore in FY23, according to the company’s annual financial statement with the Registrar of Companies (RoC).

The platform also accrued Rs 21.3 crore via interest and gains on current investments (non-operating revenue) which brought its overall revenue to Rs 46.11 crore during the year. This non-operating income played a significant role in bolstering the company's total revenue amidst challenges in its core business operations.

Neo-bank unicorn Open has made Rs 100 Cr approximately from its operations since its inception in 2017, while its outstanding losses stood at Rs 1,831 Cr at the end of the last fiscal year (FY24).

The company is primarily engaged in developing digital business payment solutions that provide businesses with a fully digital current account and a host of other integrated business-enabling tools in relation to finance, accounting, and credit, each in partnership with banking and lending partners.

As per its website, Open has over 3.5 million clients and claims to process annual transactions worth more than $35 billion.

Expense Breakdown

FY23

Total ₹ 296.50 Cr

FY24

Total ₹ 194.65 Cr

• Employee benefits

• IT and payment gateway cost

• Advertising & promotions

• Legal & professional

• Others

To check complete Expense Breakdown visit thekredible.comView full data

Moving towards the expense side, employee benefits turned out to be the largest cost contributing nearly 60% of the overall expenses. This cost shrank 21.6% to Rs 117.08 crore in FY24 from Rs 149.25 in FY23. Importantly, this cost also includes expenses on the employee stock option plan (ESOP) of Rs 37 crore in FY24.

Spends on IT and payment gateway were another major cost during the year which decreased 13.2% to Rs 25.34 crore whereas advertising & promotions slipped 84.7% to Rs 8.85 crore in FY24 against Rs 57.67 crore in FY23. Visit TheKredible for more details.

The company's total expenditure was reduced by 34.4%, bringing it down to Rs 194.65 crore during the year.

Following the cost-cutting measures, Open narrowed its losses by 30% to Rs 169.68 crore in FY24 in contrast to Rs 242.2 crore in FY23.

Furthermore, operating cash outflows improved by 55.4%, reducing to Rs 91.57 crore in FY24. While these numbers indicate improvement, it appears this is primarily driven by the slowing operational efficiency of the company, rather than growth in core business performance.

FY23-FY24

	FY23	FY24
EBITDA Margin	-396.97%	-264.50%
Expense/₹ of Op Revenue	₹9.92	₹7.85
ROCE	-50.01%	-45.61%

Overall, Open’s outstanding losses stood at around Rs 1,831 crore at the end of FY24. The EBITDA margin and ROCE stood at -264.50% and -45.61% during the year. On a unit level, the Bengaluru-based company spent Rs 7.85 to earn a rupee in the last fiscal year.

In 2022, Open got approval for a payment aggregator license from the Reserve Bank of India. The platform achieved unicorn status after raising $50 million in a funding round led by IIFL, with contributions from Tiger Global, in May 2022. As per TheKredible, Open has raised around $190 million funding to date.

While the company’s losses are still high, the company is eyeing to turn profitable by the end of 2025. It competes with Jupiter, Razorpay X,  and Niyo among a few others.

Neo Banks in India have faced a predictable set of issues, not least of which is limited differentiation vis a vis private sector banks that have already joined their selling skills in a highly competitive market. Add to that the regulatory uncertainty around their operations, and almost all Neo banks, it is safe to predict, are well below what they considered par numbers in their projections during the pre-covid period when most were set up.  Open faces the same set of challenges, and the sharp cost cuts seem to indicate a firm preparing for a siege, rather than growing anytime soon, notwithstanding claims to become profitable next financial year.