Morgan Stanley-backed Recykal’s scale dips in FY24; losses spike 31%

While Recykal, a B2B waste management marketplace, achieved 4X year-on-year growth in FY23, the firm could not maintain the same momentum in FY24, with its gross revenue declining by nearly 5%. Moreover, the company’s losses spiked 31% in the same period.

Recykal’s gross revenue declined by 4.4% to Rs 712 crore in FY24 from Rs 745 crore in FY23, its consolidated financial statements sourced from the Registrar of Companies show.

Founded in 2016, Recykal offers digital solutions for waste management, assisting businesses in meeting EPR targets, sourcing recyclables, and tracking industrial waste. Its services include EPR certificates, plastic neutrality, ITAD, a digital marketplace, and circularity solutions.

Gross collections from scrap and waste sales contributed 85% of the gross revenue, which declined 7.4% year-on-year to Rs 608 crore in FY24 from Rs 657 crore in FY23. The remaining revenue was generated from the sale of sustainability services, including EPR certificates.

Recykal also added Rs 6 crore interest on deposits and gain on the sale of current investments which tallied the overall income to Rs 718 crore in the last fiscal year, from Rs 748 crore in FY23.

For the waste management firm, scrap and waste procurement remained the largest cost center, making up 89.5% of total expenses. With a slight decline in scale, this cost decreased by 3.6% to Rs 673 crore in FY24.

Employee benefits surged by 43.3% to Rs 43 crore in FY24, including Rs 3.2 crore in ESOP costs (non-cash). Provisions for doubtful debts, legal expenses, rent, communication, logistics, and other overheads drove total expenditure to Rs 752 crore in FY24.

See TheKredible for the detailed expense breakup.

The decline in scale led Recykal to record a 30.8% increase in losses, standing at Rs 34 crore in FY24, up from Rs 26 crore in FY23. Its Return on Capital Employed (ROCE) stood at -15.66%, while its EBITDA margin was -4.04%, with an expense-to-revenue ratio of Rs 1.06.

By the end of FY24, Recykal reported total current assets of Rs 317 crore, including Rs 70 crore in cash and bank balances.

"Recykal continues to prioritize business expansion, R&D, and investments in digital and AI-driven waste management solutions to enhance efficiency and scalability. As the company grows, it is also focused on creating value for its team through improved employee benefits and ESOPs, reinforcing its commitment to talent retention and innovation. While these strategic investments impact short-term profitability, they lay the foundation for more substantial operational efficiency and industry leadership in the circular economy space," said a company spokesperson.

Recykal has raised over $38 million to date including its $13 million round led by 360 ONE Asset Management. According to the startup data intelligence platform TheKredible, Morgan Stanley is the largest external stakeholder followed by 360 One Asset Management.

The brakes on growth is a little inexplicable, considering that its early days for Recykal on the growth journey. One would have to assume it is an aberration linked to a singular event, and not a trend across the business. Even though most businesses in India spend on waste management only when faced with legal repercussions rather than genuine motives, the industry offers a huge upside as laws do make an appearance, and more importantly, are enforced. Broader awareness across society is a must, and not the kind of resigned acceptance of suicidal levels of pollution that we see in Delhi NCR and many of our other cities. 

Whether that takes a year, three years, or some transparency from the government in sharing related health data, no one knows, but there is zero doubt that change will happen. RecyKal seems well placed to benefit, and remains a firm to watch to track progress indirectly in India’s efforts to tackle its waste challenge.