In FY22, the parent company of ShareChat spent Rs 3,407 Cr while making Rs 347 Cr
- ByStartupStory | January 3, 2023
The parent company of the short video entertainment app Moj and the informal social media platform ShareChat, Mohalla Tech, obtained one of the largest fundraising rounds in September 2022 from Google, Times Group, and Temasek for a total of 255 million dollars. The company raised money in three rounds during FY22, and as a result, its valuation increased five times, topping $5 billion.
According to ShareChat’s consolidated annual financial statement filed with the Registrar of Companies, the company’s valuation increased in a hockey stick pattern along with a 4.3X increase in its operating revenue, which increased to Rs 347 crore during the most recent fiscal year from Rs 80.4 crore in FY21 (RoC).
The Bengaluru-based business specializes in running the social networking platform ShareChat, the short-form video app Moj, and the online fantasy sports site Jeet11. More than 60% of ShareChat’s revenue came from the platform’s advertising services. From Rs 77 crore in FY21 to Rs 212.2 crore in FY22, these receipts increased by 2.8X. In-app purchases for “ShareChat Coin,” which accounted for 34.7% of the total operational revenue, are also sold by the company for its chatrooms. From merely Rs 3.44 crore in FY21, this income increased 35X to Rs 120.5 crore in the most recent fiscal year.
The business introduced Jeet11, a skill-based game with real money, as its fantasy sports gaming platform in February 2020. In FY22, the gaming platform generated Rs 14.24 crore in revenue. It’s important to note that Jeet11 closed in December last year, firing about 100 workers.
In addition, ShareChat generated Rs 72.3 crore from interest, gains on current investments, and other non-operating income, bringing its total revenue for the most recent fiscal year to Rs 419 crore (FY22). Business development expenses, which made up 33.5% of ShareChat’s total expenses, continued to be its largest cost component and are anticipated to include client acquisition and technology-related costs. From Rs 662.6 crore in FY21 to Rs 1,143 crore in FY22, this expense increased by 72.5%.
The surge in server expenses, which increased 2.3X to Rs 845 crore in FY22 from Rs 367 crore in FY21, may possibly be evidence of the increase in scale. Additionally, during the fiscal year, spending for employee benefits increased 2.8X to Rs 505 crore. Employee share-based compensation totaling Rs. 73.83 crores was also included in this expenditure (a non-cash expense).
In FY22, spending on legal fees and content development increased by 8.6X and 6.1X, respectively, to Rs 422 crore and Rs 70 crore. Additionally, ShareChat spent Rs 78.67 crore on platform service fees, communications, distributor support, analytics, and other associated expenses. Finally, compared to FY21, its overall cost increased 2.4X to Rs 3,407 crore from Rs 1,420 crore.
Similar to its costs, ShareChat had a 2.3X increase in yearly losses in FY22, from Rs 1,324 crore to Rs 2,988 crore. During the most recent fiscal year, its cash outflows from operations increased 2.5 times to Rs 2,676 crore. Additionally, during FY21, the business recorded a non-cash charge of Rs 137 crore as a loss on the fair value of CCPS, which was categorized as a liability. This cost was not included by Entrackr when determining overall losses and ratios.
Due to the more than fourfold increase in scale, EBITDA margin and ROCE increased to -685.82% and -69.35% in FY22, respectively, despite the increase in losses. On a per-unit basis, ShareChat spent Rs 9.82 to earn a rupee during the same time period. Meanwhile, its unpaid losses increased.
The story of ShareChat illustrates the difficulty of creating an Indian platform that is on par with any international platform. With an underdeveloped Indian advertising market, significant investments are necessary. One can understand the financial rationale ShareChat’s investors have for the company given that India is one of the top five markets in the world for popular social media websites and applications. The company needs more than a year of 4.3X sales growth to catch up and enter sustainable terrain, as far as its long-term survival is concerned, as losses or costs are now showing no indications of slowing down.
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