Zoho’s profit surpasses Rs 2,700 Crore in FY22

• ByStartupStory     |    January 28, 2023

When it comes to scale and profit, it appears that bootstrapped tech companies are leading the way. Zerodha, Zoho, Noise, and Gameberry, among others, have managed massive scale with real profits over the years. Zoho Corporation, a provider of business software, continues to lead the pack in terms of both scale and profit.

According to its consolidated annual financial statements filed with the Registrar of Companies, Zoho’s revenue from operations increased 28.3% to Rs 6,711 crore in FY22 from Rs 5,230 crore in FY21 (RoC).

The Sridhar Vembu-led company earns money by selling cloud software suite licences and collecting software subscription fees from clients all over the world.

Its business application software Zoho One accounted for approximately 52.6% of total collections. This income increased by 62% in the last fiscal year to Rs 3,533 crore, up from Rs 2,181 crore in FY21.

Revenue from enterprise IT management software increased by 4.1% in FY22 to Rs 3,158 crore, up from Rs 3,033 crore in FY21. Notably, in FY21, this vertical was the largest revenue generator, followed by Zoho One.

During FY22, revenue from software updates and maintenance and support licences contributed Rs 20 crore to operating revenue.

In FY22, the company’s financial income (mainly from interest on investment and deposits) increased 34% to Rs 288 crore, bringing the total income to nearly Rs 7,000 crore.

North America continues to be Zoho’s largest market, accounting for 47.7% of total revenue, or Rs 3,198 crore, followed by Europe, which accounted for 22.4% of total sales. Asia, Latin America, Africa, and Australia contributed 13.2%, 5.5%, 7.5%, and 3.7% of revenue, respectively.

Employee benefit expenditure was the company’s most expensive cost centre, accounting for 51.1% of total expenditure. This cost increased by 5.9% in FY22 to Rs 1,827 crore from Rs 1,725 crore in FY21.

Advertising and promotional costs were the second largest expenditure, increasing more than 2x to Rs 715 crore in FY22.

In FY22, Zoho’s legal and professional costs increased by 23.2% to Rs 175 crore. It also spent Rs 125 crore on information technology, increasing its total cost by 18% to Rs 3,572 crore in FY22.

Zoho’s profit increased 43.3% to Rs 2,749 crore in FY22, from Rs 1,918 crore in FY21, owing to the company’s steady growth.

In terms of ratios, Zoho’s ROCE and EBITDA margins remained positive at 31.27% and 43.38%, respectively. In FY22, it spent only Re 0.53 to earn a single unit of operating revenue.

Zoho, which operates in over 150 countries and employs over 11,000 people, recently announced that its annual revenue has surpassed $1 billion (roughly Rs 7,600 crore). However, the company anticipates a slowdown in 2022. The Chennai-based company also intended to hire 2,000 people in order to expand further in India and abroad.

Freshworks (NASDAQ listed) reported a 37% increase in revenue to $128 million (approximately Rs 1,000 crore) in the September quarter, while operating losses were $3.1 million. Freshworks anticipates revenue of $494 million to 496 million (approximately Rs 4,000 crore) in CY22, up from $493 million to 497 million (approximately Rs 3,700 crore) in CY21.

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