[What The Financials] MagicBricks Turns EBITDA Positive In FY20, But Will Covid Impact Cut Deep?

With the Covid-19 pandemic having fundamentally altered day-to-day interactions for most, India’s real estate sector has had to focus on features such as video walkthroughs and online rental payments and even cashbacks and rewards to eke out growth. Since the Covid-19 impact on the sector has been grave, real estate tech startups would also need to have solid foundations to overcome the crisis. 

One such company is Times Internet-owned real estate listing marketplace MagicBricks. As the company prepares for the post-Covid-world, it could take heart from its somewhat improved financial performance in the fiscal year ending March 31, 2020, or FY20. 

According to MagicBricks’ financials, accessed by Inc42, the company recorded a revenue of INR 246.28 Cr in FY20, a 16% increase from its revenue of INR 213.24 Cr in FY19. In the same period, the company’s expenses grew 9%, from INR 221.13 Cr to INR 241.81 Cr. 

While last year, the company recorded a loss of INR 7.89 Cr, this year, it has managed to turn a slim profit of INR 4.47 Cr before tax. 

And with deferred tax listed down as an asset and added to the EBITDA, the company has reported an overall profit of INR 49.63 Cr. 

Among the company’s expenses, the cost of materials consumed, employee benefits expense, finance costs and depreciation, depletion and amortisation expense saw an increase, while other expenses, which include the company’s spending on rent, maintenance, electricity, travel and other miscellaneous expenses, declined by 9%, from INR 117.92 Cr to INR 107.49 Cr.

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MagicBricks To Offer More Services To Customers

As we indicated, real estate tech companies are focussing on features to fill the distribution gap, particularly for home viewings and documentation. The filings state that MagicBricks is looking to add more features in its diversified portfolio and that during FY20, the company invested in “real estate stocks of big developers across India for capital appreciation.”

It is worth noting that earlier this month, the Times Internet-owned company widened its bouquet of services to include a range of rental solutions such as rental agreements, tenant verification and pay rent, as it widens its property services marketplace. 

Services for tenant verification and rental agreement can be availed for prices starting INR 499. Tenants can also use Magicbricks’ Pay Rent platform to transfer rents up to INR 45,000 to their landlords by using credit cards and earn reward points, the company said in a release.

Founded in 2006 as a business owned by Times Internet, MagicBricks is a real estate portal that offers a platform for buyers and sellers to locate properties and find information about the real estate sector. 

Impact Of Covid-19 Pandemic

While the FY20 filings are somewhat encouraging for the company from a financial standpoint, they don’t reflect the impact of the Covid-19 pandemic on the business today and the resultant slowdown in the real estate business. 

With the entire country in a complete lockdown from late-March till late-May, economic activity came to a halt. India’s gross domestic product (GDP) declined by 23.9% in the quarter ending June 2020.

According to several media reports, property sales in India have come to a standstill since the Covid-19 outbreak. Both residential sales, leasing of office and warehousing spaces have witnessed a downfall. This has created a severe liquidity crisis for many builders. In some states such as West Bengal, property developers have sought bailout packages from the government. Real estate, NBFCs (non-banking financial companies), power, steel and construction were some of the sectors that were under stress pre-Covid. The pandemic has accentuated the crisis. 

In the recently announced third financial stimulus package to boost growth, finance minister Nirmala Sitharaman announced that changes would be made in tax laws to help clear unsold inventory of residential housing units up to INR 2 Cr. This could spur demand and thereby bring increased revenues for MagicBricks and the likes. 

While MagicBricks stated that its directors see “huge growth potential in the company’s line of business which is constantly reflected in the revenue growth,” and is confident of “posting improved numbers in the bottom line and make it profitable in near future”, there’s also some uncertainty from the Covid-19 pandemic.  

The filings note that as of March 31, 2020, the Covid-19 pandemic’s impact will only be reasonably ascertained at a later time. The company added that it is closely monitoring “any material changes arising from future economic conditions and impact on its business.”

According to international property consultant Knight Frank India, real estate in India has attracted private equity (PE) investments worth $2,308 Mn from January to September of this year, 57% lower compared to the total volume of investments in the sector for the same period last year. 

Among websites for property listings, MagicBricks competes with Housing.com, NoBroker, 99Acres, Makaan.com among others. As of this month, MagicBricks claims to have more than 1 Mn active property listings, of which, 58% are for sale and 42% for rent and 2.1 lakh exclusive listings posted only on its platform by individual property owners from across 700 towns and cities.