Pine Labs Owned Setu Spent INR 5.6 To Earn Every Rupee In FY23

Bengaluru-based fintech startup Setu has posted a 118% year-on-year (YoY) increase in its net loss for the financial year 2022-23 (FY23) on the back of a 2X rise in expenses. The API infrastructure startup incurred a net loss of INR 62 Cr during the fiscal under review versus a net loss of INR 28.4 Cr in FY22. 

Interestingly, fintech unicorn Pine Labs completely acquired Setu for around $70 Mn in FY23. Founded in 2018 by Sahil Kini and Nikhil Kumar, Setu is an application programming interface (API) infrastructure provider that offers services across bill payments, savings, credit and payments.

While the loss witnessed an incremental rise, the startup’s operating revenue came short. In FY23, the startup’s operating revenue saw a marginal increase of 22% to INR 14.2 Cr from INR 11.6 Cr in FY22. This translates into Pine Labs acquiring Setu at 39X to its operating revenue in FY23. 

Including other income, the startup’s total revenue stood at INR 17.5 Cr, up 6.6% from INR 16.4 Cr in FY22. 

Where Did Setu Spent?

The fintech startup’s overall expenditure rose by over 77% to INR 79.6 Cr during the year under review from INR 44.9 Cr it spent in the previous fiscal year. 

Salaries & Wages: The startup paid salaries, wages and bonuses worth INR 28.1 Cr in FY23, a 17% increase from INR 24.1 Cr it spent a fiscal ago. As per LinkedIn, the startup currently has 264 employees. 

ESOPs: The startup’s ESOPs expense increased by over 500% to INR 29.8 Cr in the year under review from INR 4.8 Cr it had spent in the previous year. It must be noted that Pine Labs acquired Setu in FY23. 

Cloud Solution: Being a startup which offers API infrastructure, it is understandable for cloud storage to eat up a significant amount of Setu’s operating revenue. In FY23, the startup spent INR 9.4 Cr or 12% of the overall expenses. Setu spent INR 4.3 Cr for cloud storage in FY22. 

On a unit economics basis, Setu spent INR 5.6 to earn every rupee from operations in FY23. Moreover, the startup’s EBITDA margin deteriorated to -348% in FY23 from -170% in FY22. 

To date, the startup has raised $18 Mn on its own and counts names such as Alpha Wave Global and Lightspeed as its investors. 

Post the acquisition, Setu retained its brand identity, business, teams, and its customers. The founders continued to lead the startup.

Soon after the acquisition, Setu received an in-principle licence from the Reserve Bank of India to operate as an account aggregator. 

For the uninitiated, an account aggregator (AA) is a type of an RBI regulated entity (with an NBFC-AA licence) that helps an individual securely and digitally access and share information from one financial institution he/she has an account with to any other regulated financial institution in the AA network. However, data cannot be shared without the consent of the individual.

Until last year, Pine Labs was eyeing for a NASDAQ listing. However, due to the current volatile market conditions, Pine Labs like many other Indian startups have put on hold their IPO dreams.