India’s Top Tech Startups Burn Through Billions in Cash for Quick Expansion in FY22

• ByStartupStory     |    April 10, 2023

Indian tech startups received billions of dollars from alternative investment firms for rapid expansion in the year ending March 2022, with food and grocery delivery, fintech, and edtech firms burning the most money, according to a VCCircle report. The study analyzed the financial data of the top 50 tech and tech-related companies by funding, excluding major players like Byju’s whose FY22 financials have not yet been submitted to the Registrar of Companies. This is the third installment of the ongoing series.

According to recent research, certain companies experienced a significant increase in their cash burn during FY22, with the amount rising from 14,386 crores to 30,304 crores, equivalent to $5 billion at current exchange rates. However, this figure does not include expenses related to preference shares revaluation incurred by BharatPe, a fintech startup. In total, these companies spent approximately 63,542 crores in cash over the three-year period ending in March 2022, generating an estimated revenue of 1.62 trillion rupees.

The burn rate is a measure of the amount of venture capital that a startup uses to cover its overhead costs before achieving positive cash flow from operations. However, to simplify matters, operating losses were used as a proxy for cash burn. Because most startups lack collateral and face other challenges, they are often unable to secure credit, and instead rely on funds from venture capitalists to cover their operating losses.

Among the 50 startups analyzed, the top 10 cash burners included several unicorns, such as Swiggy and BigBasket (food and grocery delivery), ShareChat (social media), Unacademy (edtech), PharmEasy (online pharmacy), and PhonePe, Cred, and BharatPe (financial startups). The list also featured Oyo (hospitality) and VerSe Innovation (parent company of Dailyhunt). These businesses spent a minimum of Rs. 1 crore per day in FY22, resulting in a monthly cash burn rate of at least Rs. 30 crores. Other startups on the list included Vedantu and upGrad (edtech), Zepto, DealShare, Rebel Foods, and Zepto (fast commerce provider).

Despite the high cash burn rates among many startups, a few firms were able to reduce costs in proportion to their revenues in FY22. These included Oyo, Zeta, KreditBee, Paytm, and Hike. Some startups, such as Zetwerk, Glance, Pepperfry, and XpressBees, even reported positive Ebitda as they lowered their burn rates. Others, such as Pine Labs, Citius Healthcare, Razorpay, Groww, Infra.market, and OfBusiness, saw improved Ebitda. Although the Ebitda for Dream11, Ecom Express, and Lenskart declined from the previous fiscal year, it remained positive.

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