Indian companies continue to crank out balance sheets that would make traditional investors squirm, even as the stock market turns against loss-making startups.
For FY21, Cred recorded a loss of Rs. 524 crore. The company’s total revenue was only Rs. 95 crore. Cred spent Rs. 418 crore on other expenses, including marketing, after signing up a slew of celebrities for a flashy ad campaign and sponsoring the IPL last year. Employee costs amounted to an additional Rs. 138 crore. As a result, Cred’s entire revenue was much lower than what it spent on marketing, personnel pay, and other expenses.
Cred’s results, as bleak as they were, were an improvement over previous year’s. Cred’s revenue increased from Rs. 52 lakh in fiscal year 20 to Rs. 95 crore in fiscal year 21. However, losses increased as well, jumping from Rs. 361 crore to Rs. 524 crore.
Cred also mentioned that it intends to obtain an Account Aggregator licence. The Account Aggregator technology allows financial organisations to seamlessly access each other’s customers’ data with their authorization, providing for frictionless financial service access between companies.
Cred, on the other hand, has a stunning few quarters. Cred was valued at $800 million in January 2021. Cred’s value had more than doubled to $2.2 billion just three months later, in April. Cred had quadrupled its valuation again six months later, this time raising capital at a valuation of $4 billion. Cred’s value had increased fivefold throughout the course of this hectic 10-month period.
However, while Cred has certainly spared no cost in recruiting a bevvy of celebrities for its commercial campaigns, including Rahul Dravid, Kapil Dev, Govinda, and others, and has also sponsored the IPL, the firm has lost over Rs. 500 crore in the process.
For years, entrepreneurs have justified their losses by stating that the money was spent on creating their brands or gathering customer data, and that this will eventually help them generate money in the future. The Indian stock markets, on the other hand, do not appear to be very impressed with these business concepts at the moment. Paytm, another financial firm, had also sponsored cricket tournaments while losing hundreds of crores, and its private valuation had risen to a staggering $16 billion.
