Change In Fair Value Of CCPS Bites BharatPe, FY22 Loss More Than Triples To INR 5,610.7 Cr

Fintech giant BharatPe’s total loss surged 3.4X to INR  5,610.7 Cr in the financial year 2021-22 (FY22) from INR 1,619.2 Cr in FY21 due to a sharp rise in expenses related to change in fair value of compulsory convertible preference shares (CCPS). 

BharatPe’s total expenses jumped 3.4X to INR 6,264.90 Cr in FY22 from INR 1,804 Cr in the previous year. As per its filing with the Ministry of Corporate Affairs, the startup’s expenses due to change in fair value of CCPS stood at INR 4,782 Cr in FY22. Excluding the CCPS expenses, BharatPe’s operating loss stood at INR 802.9 Cr in FY22, 2.8X higher than the loss of INR 277.2 Cr (excluding CCPS expenses) in FY21. 

Startups consider expenses due to change in fair value of CCPS as an extraordinary item. Referring to the CCPS expenses, a BharatPe spokesperson told Inc42 in a statement earlier, “This item is one-off and shall not be there from next year as we have now reclassified the compulsory convertible preference shares from liability to equity.”

Having said that, the change in fair value of CCPS further raises questions on BharatPe’s valuation of close to $3 Bn. Inc42 earlier explained that in a detailed piece. 

Meanwhile, the Delhi-based startup’s revenue from operations rose 283% to INR 456.8 Cr from INR 119 Cr in FY21 due to rise in payments volumes and loan disbursals. BharatPe earlier said that it facilitated loan disbursals worth INR 350 Cr per month on an average in FY22 which has increased to INR 1,200 Cr per month in the ongoing financial year. 

Meanwhile, the startup’s total revenue jumped 267.7% to INR 680 Cr in FY22 from INR 184.9 Cr in FY21. 

Advertising and promotional expenses jumped over 400% to INR 245.5 Cr from INR 44.8 Cr in FY21. This means that the startup spent INR 1 on advertising to earn every INR 1.86 in operating revenue. It must be noted that earlier in 2020, BharatPe signed 11 cricketers as brand ambassadors. In 2021, it also inked a partnership deal with ICC till 2023. 

The startup’s employee benefit expenses jumped 145% to INR 184.7 Cr from INR 75.4 Cr in FY21. Employee benefit expenses comprise employee salaries, PF contribution, gratuity, among other benefits. 

Transaction processing charges stood at INR 226.9 Cr during the year under review, while financial guarantee expenses were at INR 266.6 Cr. BharatPe had spent INR 97.4 Cr on transaction processing charges and INR 56.3 Cr on financial guarantee expenses in FY21. 

The fintech startup, founded in 2018, has been in a sort of crisis since the public spat between its former MD Ashneer Grover and its board last year. It resulted in Grover and his wife Madhuri Jain Grover, who was also head of controls at BharatPe, exiting the company. Earlier this month, Suhail Sameer also resigned from the post of CEO of BharatPe, accentuating the leadership crisis at the startup.

BharatPe is currently involved in a legal battle with Ashneer Grover, and has also filed a criminal complaint against him and his family with the Economic Offences Wing (EoW) on 17 charges, including alleged criminal breach of trust, forgery, document fabrication, and embezzlement.