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[What The Financials] Hike Faces Uphill Climb Despite Cutting Losses In Half

[What The Financials] Hike Faces Uphill Climb Despite Cutting Losses In Half

Hike was valued at $1.4 Bn and besides messaging, it also offers payments and gaming services

The company launched Sticker Chat as an unbundled chatting app to pivot from the super app model

Hike’s operational income for FY19 was merely INR 3.5 Lakh

In 2016, along with demonetisation, another thing that went downhill was Hike’s growth. The Kavin Bharti Mittal-led chat app had reached 100 Mn user base in 2016 but since then, its journey has faced more hiccups than milestones, thanks to years of losses.

In the last few years, the company’s focus has evolved to gaining back its growth rate and getting back into the limelight of social media users to increasing engagement. Hike, which was valued at $1.4 Bn, had raked in more than $261 Mn in funding from SoftBank, Tiger Global, Tencent, Foxconn and Bharti.

So far, Hike has positioned itself as a ‘super app’ which not only lets you chat but also has news, social feeds, Hike Wallet integration, bookings, gaming recharges and more. But recently, it moved to an unbundled future, releasing a revamped Sticker Chat app, along with plans for a new content app as well as a gaming platform.

Through its payments service, Hike facilitates mobile recharges, bill payments, availability of bus tickets through the marketplace platform and earns a commission for the distribution of services. After years of reporting losses and being questioned for its monetisation model, Hike’s financial year, ending on March 31, 2019, didn’t show any improvement in revenue and the company faces an uphill climb to profitability, despite lowering the losses.

Most disturbingly, Hike showed operational income of merely INR 3.5 Lakh for FY 2018-19.

How Is Hike Planning To Survive?

The company filings show that Hike reported a revenue of INR 26.49 Cr in FY19, a nearly 33% fall against INR 39.46 Cr in FY18. The details showed that Hike’s operational income for FY19 was merely INR 3.5 Lakh, which is a 93% Y-o-Y decrease against INR 52.08 Lakh in FY18. The company has also shown revenue under ‘other income’ as INR 26.46 Cr for the year.

At the same time, the company has been able to control its expenses bringing it down to INR 231.98 Cr in FY19 from INR 462.48 Cr in FY18. Along with this, the company’s losses have also reached INR 205.6 Cr in FY19, a 51% improvement from INR 423.03 Cr in FY18. 

The breakdown of expenses showed that Hike has spent INR 109.92 Cr in FY19 on employee benefits, as against INR 172.49 Cr in FY18. Further, the company’s other expenses which include Server, marketing and other costs is INR 115.29 Cr in FY19, as against INR 282.4 Cr in FY18. Notably, other expenses for FY19 are 4.35X of the company’s total income for the year.

Will Unbundling Strategy Reduce Losses For Hike?

Hike Sticker Chat is the first piece in Hike’s new strategy of going from this kind of super app to a multi-app entity. At the same time, the older Hike Messenger app will continue to provide the super app experience for ‘laggard users’. The company revamped its Hike Sticker Chat earlier this year with a deeper focus on AI and machine learning to not only help sticker discovery but also create some stickers on the go.

Hike announced that Sticker Chat has crossed a big milestone — 1 Mn weekly active users. Talking to Inc42, Mittal said that the ‘new’ Hike will be built around three pieces. The first piece of the puzzle is the chat app. “So there is gaming, and there are news and content as well.”

Mittal also said that Hike’s monetisation model may not necessarily follow the typical user-generated revenue. He explained in reference to Sticker Chat that, “We have partnerships with Bollywood, like the Gully Boy partnership which went viral. The Gully Boy stickers inside and outside the app got much more traction than others.”

Corrections | 16:40, November 5, 2019

  • The original version of this article was titled ‘[What The Financials] Hike Faces Uphill Climb As Losses Rise By Over 100%’. We have updated the headline to more accurately depict the facts of the report. We apologise for the mistake. 
  • The earlier version of the article had swapped the figures for FY18 and FY19 for expenses and losses. The FY18 expense and loss was reported to be INR 231.98 Cr and INR 205.6 Cr, respectively and FY19 expense and loss was reported to be INR 462.4 Cr and INR 423 Cr, respectively. The figures have been updated for both years.
  • The earlier version of the article reported other expenses for FY18 and FY19 being INR 115.29 Cr and INR 282.4 Cr, respectively and employee benefit expenses for FY18 and FY19 to be INR 109.92 Cr and INR 172.49 Cr, respectively. The figures have been updated to correct the swapped figures.
  • The earlier version of the story said, “other expenses for FY19 are 10.6X of the company’s total income for the year.” This has been corrected to other expenses being 4.35X of the total income for FY19.