Darwinbox racks up Rs 116 Cr revenue in FY22, losses cross over 7X
- ByStartupStory | February 3, 2023
Darwinbox, an HR tech platform, became a unicorn after a $72 million series D round in the fourth quarter of FY22 from TCV, Salesforce Ventures, Sequoia India, Lightspeed, and others. During the same fiscal year, the Hyderabad-based company increased its revenue by more than twofold.
According to the consolidated financial statements filed with the Registrar of Companies, Darwinbox increased its scale by 2.33X to Rs 116.7 crore in FY22 from Rs 50 crore in FY21.
Darwinbox is a cloud-based integrated HR technology solution that includes solutions for recruitment, payroll, employee engagement, talent management, and people analytics throughout the employee life cycle.
According to source analysis, membership subscription fees accounted for 81% of the company’s revenue, which increased 2.4X to Rs 94.55 crore in FY22 from Rs 38.99 crore in FY21.
The rest of its operating income came from its implementation and integration consultancy services, which increased twofold to Rs 22.15 crore in FY22 from Rs 11 crore in FY21.
On the cost side, employee benefit expenses accounted for 57.1% of total expenditure. During FY22, this cost increased by more than 2.5X to Rs 104.1 crore. This included Rs 11.88 crore in ESOP expenses as well (non-cash). The company had approximately 1,000 employees in 2022 and plans to increase that number to 2,000-2500 in the next two years.
The company’s second largest cost was information technology, which increased 2.85X to Rs 28.35 crore during FY22. Legal and professional fees increased 3.6X to Rs 15.76 crore in FY22.
The company increased its advertising and promotional expenses by Rs 5.93 crore, increasing total expenditure by 2.86X to Rs 182.39 crore in FY22 from Rs 63.6 crore in FY21.
With a cost increase of more than twofolds, the company’s losses increased 7.6X to Rs 66.58 crore in FY22 from Rs 8.71 crore in FY21. As a result, cash outflow from operations increased 6.1X to Rs 59.6 crore in the previous fiscal year.
Darwinbox stated during the most recent funding round that its India business is profitable, and the company expects to be profitable at the group level by 2025. Following the Series D round, it raised an additional $9 million from Microsoft and the State Bank of India (SBI). In collaboration with Microsoft, the firm eyes $100 million (approx Rs 8,000 crore) annual run rate (ARR) in the next couple of years.
In terms of ratios, the company’s ROCE and EBITDA margins fell to -8.33% and -48.45%, respectively, in FY22. In the previous fiscal year, the company spent Rs 1.56 to earn a single unit of operating revenue.
Darwinbox is also present in Indonesia, the Philippines, Singapore, Thailand, Malaysia, the United Arab Emirates, and the United States. It intends to begin operations in Japan and Australia, followed by Europe and Latin America. The seven-year-old company, which has over 700 clients and 2 million users, also intends to go public in the next 2-3 years.
Darwinbox exhibits all of the characteristics of a promising company with proven market fit that is running on steroids or VC money. The high burn rate and rapid expansion will be sustainable only when the company claims to have broken even in more than one key geography, such as India. Otherwise, firms in these uncertain times risk burning out as quickly as they rise and dazzle, if VC money boosters become unavailable for the next stage of growth. Or comes with a more demanding request.
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