Zerodha Rival Upstox Sees Losses Rise 3X In FY20

[What The FInancials] Tiger Global-Backed Upstox Losses Up By 3X In FY20; Revenue Crosses INR 150 Cr

SUMMARY

Upstox has reported a revenue of INR 163.39 Cr with expense of INR 200.4 Cr, leading to a net loss of INR-37.05 Cr

It is the second biggest stockbroking platform in India, right after Zerodha with about 25 Lakh users

With three subsidiaries out performing FY2019’s performance, Zerodha is expected to better in FY2020

What The Financials

Inc42 unveils and deciphers all the important financial metrics of Indian startups across industries. Find out revenues, unit economics, profit & loss and all the important financial metrics to judge how the startup will perform in the coming years.

After a profitable run of two years, digital stockbroking firm Upstox has ended up in losses but with a 100% increase in revenue in the financial year 2020, which ended in March last year. The company reported a consolidated revenue of INR 163.39 Cr with a net loss of INR 37.05 Cr. The company’s expenses have also grown about 3x to INR 200.4 Cr in FY2020, the company’s CEO and cofounder Ravi Kumar has confirmed.

The financials have been reported through Upstox’s two subsidiaries RKSV Securities and RKSV Commodities, with the former being the bigger entity. According to the RKSV Securities’ financial statement accessed by Inc42, the subsidiary has reported a revenue of INR 154.6 Cr with a net loss of INR 37.98 Cr. Its expenses have grown almost 3x or 201% to INR 193.3 Cr in the same time frame.

Inc42 could not access the RKSV Commodities’ financial statement for FY2020.

In the previous fiscal year FY2019, Upstox Securities had reported a revenue of INR 77.5 Cr with INR 64.1 Cr expenses, leading to a profit of INR 13.06 Cr. It had reported a profit of INR 2 Cr in FY2018 with a revenue of INR 27 Cr.

Around 44% of its spending was in three areas — employee benefits expenses, discounting charges and after-sales service expenses. Upstox spent 16.7% (INR 32.39 Cr) on employee benefits, 13% (INR 25.15 Cr) on after-sales service expenses and 14.4% (INR 27.88 Cr) on discounting charges.

Besides this, the company spent about 11.5% (INR 22.4 Cr) of its total expenses on advertising promotional expenses, up from last year’s 7.4% (INR 4.78 Cr). Compared to FY2019, the company’s legal & professional charges increased from INR 2.98 Cr to INR 20.1 Cr in FY2020.

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“The unit economics of the business are extremely favourable and we are choosing to spend on growth because the market is very ripe right now for a huge influx of customers coming on board. 65%-75% of our customers are first-time investors with first DEMAT account and we are going to continue doing that,” Kumar added.

Zerodha Vs Upstox: The Stock Market Battle

Upstox’s parent company RKSV Securities was founded by Shrini Viswanath, Raghu Kumar and Ravi Kumar in 2008. It started off as a proprietary trading firm, but ventured into retail brokerage with the launch of Upstox in 2012. It offers online stock market investment services, advisory services, mutual fund investments and more.

The company, on its website, claims to have about 20 Lakh traders, generating daily notional exchange turnover of INR 1 Lakh Cr. It also claims to have about 10 Lakh downloads on its trading app, which competes with Zerodha, Groww, AngelBroking, Paytm Money and others.

According to the data compiled by the National Stock Exchange (NSE) uptil September 2020, Upstox is the second biggest stockbroking platform in India, after Zerodha. While Zerodha had 24.7 Lakh clients at the end of September, Upstox had 12.20 Lakh. The company was ranked on the 48th rank in 2017.

Commenting on the same, the company’s CEO Ravi Kumar had said that majority of its customers are millennials, which come from Tier 2 and Tier 3 cities such as Nashik, Jaipur, Guntur, Patna, Kannur, Tiruvallur and Nainital, among others.

“We are adding 200,000-300,000 new accounts everymonth. The average age of our customers is 31, and 70% of our user base is from tier two cities and tier three cities,” Kumar added.

It has raised about $29 Mn till date from marquee investors like Tiger Global, Kalaari Capital, GVK Davix, Ratan Tata and others.

In FY20, Zerodha’s core broking business reported revenue of INR 1093 Cr, with a profit of INR 592 Cr, as per the financials for Zerodha Broking Limited. The company is still leading the market and given Upstox’s loss-making run, there’s a fair bit of distance between the two digital stockbroking giants.

Update: January 29, 2020 | 10:15 PM