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[What The Financials] BigBasket Banks On Positive Cashflow For Survival As Losses Nearly Double

[What The Financials] BigBasket Banks On Positive Cashflow For Survival As Losses Nearly Double

BigBasket turned unicorn earlier this year with a Series F round in May

For the financial year ending March 2019, its losses increased by 94%

Will BigBasket’s pivot to the warehousing model for faster fulfillment change its fortunes?

India’s online grocery space has gone through a significant revolution in the past five years. With the rise of ecommerce, urban Indians became more comfortable ordering groceries online, making the grocery delivery market one of the fastest-growing in the country. The rising tide has carried the fortunes of Grofers and BigBasket in this sector, with the likes of Amazon, Flipkart now eyeing a piece of the pie.

Backed by Trifecta Capital, Helion Venture Partners, Bessemer Venture Partners, and Alibaba Group, BigBasket turned unicorn in May this year when it closed its Series F round. This took its total funding raised to over $1.02 Bn.

So while FY 2019-2020 started of well for BigBasket, the end of FY 2018-2019 brought bad news in the form of nearly 2x losses compared to the previous year.

With reported revenue of INR 2380 Cr in FY19, it observed a major jump of 69% from the previous year where it reported revenue of INR 1409 Cr. While income from sales of products continued to dominate the total revenue, proceeds from services increased by 68% to INR 32 Cr.

Despite the revenue growth, the company did not turn a profit — BigBasket’s losses stood at INR 348 Cr in FY19 as compared to INR 179 Cr in the previous year. The losses increased by a sizeable 94%.

Innovative Retail Concepts Pvt Ltd, the retail arm of BigBasket, said in the filing, “While the Company has registered significant growth in business over the years, it has also incurred significant losses in the past to invest in growth.”

The company added, “These events or conditions along with other conditions such as accumulated losses, complete erosion of net worth and negative working capital position as of the balance sheet date, indicate that a material uncertainty exists that cast significant doubt on the company’s ability to continue as a going concern and therefore it may be unable to realize its assets and discharge its liabilities in the normal course of business.”

Uncertainty of when the company will attain profitability and positive operating cash flows have led BigBasket to question how long this might be sustainable. However, the management hopes that it will be able to generate sufficient cash flows to meet its obligations based on the growth recorded during the year.

Inc42 reached out to BigBasket for clarification on the above portion as well as a deeper understanding of the company’s financial position. We did not receive a response till the time of publishing.

BigBasket’s total expenses increased by 72% from INR 1589 Cr in the previous financial year to INR 2730 Cr in FY19. Employee benefits expenses form the biggest chunk of the total expenses incurred. Advertising expenses of the company also increased a manifold of 2.5 times in FY19. In fact, every major expense head showed an increasing trend in FY19.

BigBasket competes with Grofers which also failed to show profits for FY19. Grofers reported a loss of INR 448 Cr in FY19, much higher than BigBasket. However, in terms of expenses, BigBasket is leagues ahead with INR 2730 Cr as compared to INR 531.6 Cr in FY19.

Like many ecommerce verticals, the online grocery segment is also veering towards the subscription model. As the online grocery shopping audience matures, it would be more comfortable with parting the money to seek value, which subscriptions programmes offer.

BigBasket and Grofers have actively looked at monetising this convenience sought by consumers. The rapid adoption of subscription programmes can be attributed to affordable pricing and a variety of benefits ranging from savings via cashback and discounts, and free or priority delivery.

The changing consumer landscape and consumer becoming more accustomed to online shopping have been the key drivers for the growth of online grocery markets.