Freecharge’s scale has increased 12.5X since Axis Bank acquired it
- ByStartupStory | November 1, 2022
In the last five years, Freecharge appears to have had a substantial turnaround while operating under the Axis Bank brand. Freecharge was purchased by the third-largest private bank in FY18, a year in which the company had a loss of Rs 81 crore and an income of Rs 23 crore. But since then, Freecharge’s size has increased 12.5X while still turning a profit.
During the fiscal year that ended in March 2022, Freecharge’s operating revenue increased by 23.2% to Rs 287 crore, according to the company’s annual financial filings filed with the Registrar of Companies (RoC).
Business support fees were the main source of income for Axis Bank in FY22, accounting for 63.4% of all operating income. These fees were collected in exchange for providing financial and customer acquisition services to the bank. From Rs 63 crore in FY21 to Rs 182 crore in FY22, these receipts increased by approximately 3X.
Collections from services related to the creation and administration of technological products for the parent organization were recorded as TSPs (technology service providers) and accounted for 23% of all operational revenue in FY22, despite a reduction of 11.8% to Rs 65.61 crore. Additionally, the company received commissions worth Rs 26.3 crore in the most recent fiscal year, up 64.5% from Rs 16 crore in FY21 (paid to merchants as checkout fees).
Importantly, there was no revenue from wallet maintenance in FY22, compared to Rs 78.72 crore from the same activity in FY21. Since the company made it free for users in FY22, this revenue has been eliminated.
In addition to rapid loans, pay later UPI, FASTag, OTT, and loan repayment services, Freecharge also offers investment choices like mutual funds, digital gold, and fixed deposits. It recently collaborated with Cashfree Payments to offer Buy Now Pay Later (BNPL) services for up to Rs 10,000 to its subscribers.
Moving on to the expense side, the company’s greatest cost item, employee benefits, accounted for over 42% of its yearly spending. In FY22, this expense rose 16.4% to Rs 108.54 crore.
The second-highest expense, advertising and promotion, increased by 62% to Rs 49.4 crore in FY22. During FY22, other significant cost components such as legal-professional and software expenses increased by 352% and 20%, respectively, to Rs 17.64 crore and Rs 12.85 crore. When compared to FY21, Freecharge’s overall expenditures increased by 40.8% to Rs 259 crore, from Rs 184 crore.
Freecharge’s expenses increased faster than its income, which resulted in a 38% decline in profits to Rs 22.6 crore in FY22. In FY22, its EBITDA margin and ROCE declined to 13.92% and 12.78%, respectively. In FY22, the company spent Rs 0.9 for every rupee of operating revenue.
In July 2017, Axis Bank purchased Freecharge from Snapdeal for Rs 385 crore ($60 million) in a deal. Prior to that, the wallet platform was sold by the original creators of Freecharge, Kunal Shah and Sandeep Tandon, to Snapdeal in April 2015 for around $400 million.
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