FY22 Losses of Soothe Healthcare Surge 2.3X Despite Revenue Growth Nearing Rs 140 Cr
- ByStartupStory | February 17, 2023
Soothe Healthcare, a brand specializing in personal hygiene and self care, recently secured a substantial investment of Rs 175 crore in October 2022. The company’s impressive growth rate has been a driving force behind investor interest, with a revenue increase of 4.3 times over the past two fiscal years (FY21 and FY22). Investors are optimistic that their investment will fuel further growth for the company.
According to the consolidated financial statements filed with the Registrar of Companies (RoC), Soothe Healthcare’s operating income rose by 76.5% from Rs 79 crore in FY21 to Rs 139.4 crore in FY22.
Soothe Healthcare, based in Delhi, owns several personal hygiene and self-care brands including Paree, Baby Bear, and Super Liife. The company’s product line includes sanitary pads, hair removal creams, razors, adult and baby diapers, and baby care products, which were the only source of operating revenue for FY22. However, it’s worth noting that the company also distributed their products under schemes and samples that amounted to Rs 41.8 crore. This may not be a sustainable strategy in the long run, as the costs are likely to exceed the revenues.
In terms of expenses, the cost of procuring materials accounted for the largest share of Soothe Healthcare’s overall expenditure, making up 51.6% of the total. This cost increased by 112.5% to Rs 114.3 crore in FY22. Employee benefits were the second largest expense, rising by over 50% to Rs 33.67 crore during the fiscal year that ended in March 2022.
Soothe Healthcare’s sales, marketing, and transportation costs experienced significant increases in FY22, rising by 2.41X to Rs 25.3 crore and 2.04X to Rs 10 crore, respectively. Overall costs for the company also increased by 93.8% to reach Rs 221.3 crore in the last fiscal year.
Unfortunately, despite impressive revenue growth, Soothe Healthcare’s losses expanded by 2.32X to Rs 81 crore in FY22 from Rs 34.9 crore in FY21. As a result, cash outflow from operations also rose significantly, increasing by 3.33X to Rs 100 crore in the last fiscal year (FY22).
Soothe Healthcare faced a ROCE and EBITDA margin of -115.14% and -49.61%, respectively, in FY22. On a unit level, the company spent Rs 1.59 to earn a single rupee during the same period. Soothe Healthcare has chosen to operate in challenging segments with established, strong brands where quality and safety are critical, making it difficult for new entrants to break in, resulting in high marketing and distribution costs.
While the margins in some categories, such as baby care products, can be quite lucrative, this is precisely why entrenched companies have been successful in building strong barriers. The outcome for Soothe Healthcare is uncertain, as there is no proven approach in this market.
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