[What The Financials] Milkbasket’s 8.9X Increase In Losses Show Grim Reality Of Grocery Startups

India’s hyperlocal industry has seen a major shift since its initial days. Even though the paranoia of investors following several shutdowns during the hyperlocal bubble of 2015-16 still sticks around, the industry has risen from the dead to stick around and find the right players.

Some of the survivors of the hyperlocal bubble burst were players like BigBasket, Grofers, Milkbasket, etc. But what strings them together, beyond their services, is their unending loss saga. Even though the business models of Grofers-BigBasket and Milkbasket are very different, but the loss-making tendency of the overall grocery delivery industry is a trend worth noting.

Over this week, we saw that Grofers, as well as BigBasket, record a huge increase in losses, i.e. 56% and 94%, respectively for FY19. Joining the club is Gurugram-headquartered hyperlocal delivery startup Milkbasket.

Founded in 2015 by Anant Goel, Ashish Goel, Anurag Jain and Yatish Talvadia, Milkbasket caters to household grocery needs. The company claims to serve 100K households with 75K daily deliveries. Backed by investors such as Mayfield India, Beenext, Kalaari Capital, Unilever Ventures, Blume Ventures, etc, the company has raised $26 Mn in equity funding till date.

The filings of Milkbasket for the financial year ending March 31, 2019, show that its losses have ballooned 8.99X reaching INR 9.54 Cr.

However, the good part is the company has also increased its income, which has jumped 1.89X reaching INR 84.63 Cr. But the growth in expenses is higher than this, which reached INR 94.18 Cr in FY19, a 2.1X Y-o-Y increase.

 

At a time when the company is expanding its product portfolio, it claims to have seen 900% growth in the last 18 months. Not only this, it claims to be unit economics positive, the performance demands a closer look.

Growing Products As Well As Services Revenue

In its filings, Milkbasket defines itself to be “engaged in the business of offering innovative concepts and services in online and/or offline retail of household products, branded as well as private label to the domestic and overseas customers.”

 

Hence, the company’s sources of revenue are its products and services, both of which have seen improved revenues in FY19. While the income from the sale of products grew 1.88X reaching INR 83.5 Cr, the revenue of sale of services grew 1.69X reaching INR 98.63 Lakhs.

The company claims that its highest sales — around 25% — comes from its milk delivery service, which is closely followed by the delivery of fruits and vegetables.

Till now, the company had been operating in smaller ticket size products, but it has recently launched meat delivery as well. Milkbasket claims that before entering into meat delivery, the company has already delivered over 9K products across FMCG, dairy, fruits and vegetables and other household essentials.

Milkbasket: Heavy Investment Towards Advertising And More

On examining the company’s filings, we noted that the biggest increase in Milkbasket’s expenses came to advertisement. The company’s advertising and promotion cost reached INR 4.73 Cr, a Y-o-Y jump of 13.45X.

Further, the company’s biggest expense unquestionably was the purchase of stock which was INR 82.1 Cr, as against INR 27.48 Cr in FY18. Some of the other expenses were commission charges, logistics, etc.

 

Inc42’s detailed queries on Milkbasket’s FY19 performance and plans ahead remains unanswered till the time of publication.

During the recent launch of meat delivery, Milkbasket CEO Anant Goel said that the launch of meat delivery is the first of many other products or services that Milkbasket has in its plans for the next year. “For a business, these are new and high margin revenue streams and are in sync with our aim to achieve profitability in 2020,” Goel added.

However, with the astounding jump in losses and with expenses growing faster than revenues, if the company will get profitable in 2020 remains a huge question.