Can boAt Return To Its Old Glory?

“Once a startup reaches a certain level of success, it becomes necessary to invest in R&D and be on your toes as the industry changes very fast,” Aman Gupta, cofounder and CBO of boAt had said in late 2021. 

At the time, the company was growing at over 2X speed and was minting profit to the tune of INR 69 Cr. Of course, that was also the time when India’s D2C boom was in a full swing. 

Fast forward to 2024, Gupta and boAt seem to have strayed away from this mantra, as the startup has slipped into the red, and more critically, for the first time, since its inception has reported dip in its revenue in the year ending March 2024. 

Soon after this came reports suggesting that boAt is reconsidering to go for an IPO, after pulling out in 2021 following the end of the high liquidity era. 

Since then, many startups have gone on to a public listing, but one thing that’s become increasingly clear is that companies hitting the stock markets need to have a clear path to profitability, a grip on unit economics and be a dominant player in their domain. 

It’s not clear if the startup makes the cut on any of these counts. Competition — even homegrown — in the space is growing and many of the scaled up electronics and tech giants are moving towards boAt’s price point and market positioning.  

Even in terms of market share in the key TWS (true wireless stereo) category, boAt has slipped from 29.3% in 2022 to 26% in 2023, according to data from IDC. But 2021 was not that long ago — what exactly changed for boAt in the past three years such that the company has fallen into this state? 

Market Share, Revenue Dips

Founded in 2015 by Aman Gupta and Sameer Mehta, boAt is primarily a consumer audio company which is known for manufacturing affordable products which includes wired and TWS earphones, headphones and speakers. The company also sells smart watches, chargers, trimmers, power banks, among other accessories.

While boAt has forayed into different products, to date its audio revenue contributes to 80% of its overall operating revenue. 

However, being an industry leader in the affordable audio segment, the startup saw a tepid growth in audio segment. For instance, in FY24, the startup’s audio segment reported an operating revenue of INR 2,459.2 Cr, a 5% higher than INR 2,350.8 Cr in FY23.

If we take a cursory glance at the numbers, boAt’s operating revenue dipped by almost 8% to INR 3,117.7 Cr in FY24.

While boAt needs to be commended for its efforts to bring down its loss drastically to INR 80 Cr from INR 129 Cr in FY23, eyebrows were raised last year when the startup reported its first loss since its inception, almost wiping off its cumulative profit since inception.

Revenue dip was not the only concerning factor for boAt. In fact, in the calendar year 2023, despite dominating the audio space, the startup lost its market share.

One primary reason behind this could be attributed to the startup losing its market share in the audio segment. According to a IDC report in the calendar year 2023, boAt’s TWS market share plummeted to 26% from 29.3% in CY23.

While it is possible that boAt’s revenue share has increased, there’s no way of tracking that. IDC tracks shipments of units, which is an analog for market share.  

The homegrown rivals for boAt have also not exactly cracked profits and do not have significantly higher revenue momentum, but their numbers for 2023 do make for better reading than boAt. 

For instance, Boult Audio has gained TWS share of 10.7% in CY23 from 6.5% in CY22.

Even in terms of YoY growth (read shipments), boAt’s saw a mere 25.2% rise, whereas its competitors Boult saw a 136% rise, and Noise witnessed a 38.8%

“When a market has reached maturity, with a higher penetration, who will buy? For instance, 100 people own 100 earphones, and they will only buy when the product is broken. Hence, there’s marginal growth,” said a market analyst who tracks this space closely. 

It goes without saying that products in the affordable category are more prone to manufacturing defects and inconsistencies. But consumers are unlikely to go back to a brand with poor quality. Many of them might consider spending more on global brands.  

What makes matters worse for Indian brands is that international players such as JBL, Sony, Jabra and even smartphone brands such as Oppo and Realme have introduced affordable TWS products with comparable build and audio quality. 

These are also frequently on sale on ecommerce marketplaces, since manufacturers typically set an MRP with higher margin, and their arrangements with these marketplaces extends to other categories such as smartphones. 

A quick glance at Flipkart’s average price of the top four products for boAt is INR 1,199, almost at par with Boult’s, whose average cost was INR 1,299. Another homegrown brand Noise’s products are typically listed for INR 899 on Flipkart. 

On the other hand smartphone manufacturers with higher economies of scale and better distribution such as Oppo price their products around INR 2,000, similar to Realme. 

This indicates that the average price of products from Noise, Boult and boAt is not that far away from Realme or Oppo. In fact, the smartphone brands may even have the scale to lower this price further. 

Besides, boAt will keep a close watch on the upcoming brands such as Nothing, a UK-based smartphone brand which has managed to gain market presence with its innovative product designs. In fact, in the overall wearable market, Nothing and its sister brand CMF witnessed 308% growth in terms of product shipments, the highest in the category.

Industry analysts believe that innovation in the audio segment in particular has stagnated, with pricing being the only differentiation. Can boAt bank on non-audio products to break its rut? 

boAt Needs To ‘Watch’ Out

For the longest time, boAt was synonymous with affordable audio products, but the company forayed into the smartwatch market in 2020. Since then it has spent heavily in its research and development to seed the smartwatch category, and also ventured into other wearables such as smart ring in 2024. 

However, the smartwatch category hasn’t quite taken off for boAt, despite Aman Gupta brandishing one on his palm in most public appearances, including on Shark Tank India. 

In FY24, boAt saw a 44% decline in its revenue generation from its smartwatches. This category brought in INR 550.3 Cr in revenue, but pales in comparison to the INR 910.6 Cr in FY23. In fact, the FY24 wearable revenue is more comparable to FY22, when boAt generated INR 515.5 Cr from this segment. 

The IDC report shows a decline in market share in 2023 to 14% from 18.8% in 2022. This overlaps with the first nine months of FY24. 

While the startup has lost market share in 2023, the same could be said for almost all the brands. Fire-Boltt lost a marginal market share to 24.3%, whereas Noise, whose primary source of revenue is smartwatches, saw its market share dip to 22.1% from 27.2%.

According to research analysts that we spoke to, the drop in the demand for smartwatches could be attributed to the growing popularity of non-branded watches. These smartwatches are offering cheap alternatives of popular models, and are even bundled with multiple watch straps. 

With that said, boAt has drastically reduced its smartwatch launches. As per industry sources, boAt has drastically reduced its smartwatch launches earlier this year. The startup climbed to the second spot in terms of smartwatch market share in Q3 CY24 with 16.8%, right behind Noise, which enjoys a market share of 27.4%.

Will this momentum continue in FY25? For boAt, smartwatches are a big category but the drop in revenue is a major red flag. And one that can have an overhang on boAt’s overall profitability, given the investment in R&D. 

Why boAt Is Slowing Down 

That was the story of 2023 and FY24. What is the situation on the ground right now for the Aman Gupta-led company, and has it taken measures to cut its losses? 

Data shows that the July-September quarter of 2024 was rather great for boAt. The latest IDC report said the startup’s market share in wearable devices increased from 29.8% to 32.1% YoY Q3 CY24. 

As per analysts, the startup has managed to clear its older inventory this year, giving it the opportunity to reconsider its product strategy and mix going forward. Gupta will have to recalibrate the manufacturing to meet demand for the right products. 

Procurement cost, which is central to manufacturing and assembling electronics, is one of the biggest expenditures for boAt. In FY24, the startup managed to reduce this by 12% to INR 2,300 Cr, from INR 2,610.4 Cr in FY23. Further, advertising expenditure dropped by 14.4% to INR 365.6 Cr in FY24. 

With the $60 Mn raised in 2022, boAt also has a competitive edge over other audio and wearable OEMs to invest in research and development. 

In fact, the primary reason for the startup’s losses was the establishment of its manufacturing plant in India. With the factory now operational, boAt will be looking to improve its economies of scale. 

All these factors are likely to help boAt bring down its losses further in FY25. In fact, the startup did manage to turn EBITDA positive in FY24, reporting INR 14 Cr before taxes against INR 50 Cr loss in FY23. 

However, the drop in revenue is a huge red flag and one has to wonder whether boAt has taken a conscious decision to scale down in order to improve its bottom line. 

Analysts believe that product innovation cannot stop for electronics companies and R&D investments have to be ongoing. Any slow down here has a real impact on sales, as consumer demand and preferences are dictated by larger companies with significantly more resources. 

There’s undoubtedly a whole new opportunity ahead with the rise of AR and VR, AI-enabled devices and more, and what will be interesting to see is whether boAt turns its attention to these new categories. 

As more and more manufacturers enter this space, the adoption will trickle down to India from the west and the likes of boAt will have another opportunity for disruption.

But that is still some away — for the time being, boAt is navigating in a narrow stretch of the sea and other vessels will get in its way. Can it get to clear waters and add some distance between itself and its rivals?

Edited By Nikhil Subramaniam

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