[What The Financials] Livspace Revenue Grows 96% But Burgeoning Losses Are A Huge Worry

Home — the idea of having your own property, designed to perfection and different from any other home is the stuff of dreams for India’s Generation Z and millennials. While most millennials have gone for rentals or prefer staying in older homes bought by previous generations, the trend of well-designed and decked-up apartments and independent spaces is the reserve of the affluent and those investing in real estate.

As the home design market matures and sees increased consumer interest, this domain has seen technology and marketplace models refining the unorganised market for handymen, designers and home decor providers. Amid the market leaders, Bengaluru-based home design and decor service provider Livspace has set the pace and is on track to become a unicorn too. The company founded in 2014 by Anuj Srivastava, Ramakant Sharma and Shagufta Anurag offers end-to-end home design experience for homeowners and home designers.

The company has raised $157.6 Mn in funding from investors such as US-based venture capital firm TPG Growth and global investment bank and active investor Goldman Sachs, along with other existing investors Jungle Ventures, Bessemer Venture Partners and Helion Ventures as well as furniture retailer IKEA.

It is also said to be on its way to join the unicorn club with its next Series D funding, which is already in the pipeline. However, just like several other unicorns of the country, it is still a loss-making company, with losses increasing Y-o-Y.

The filings of Home Interior Designs E-commerce Private Limited, one of the wholly-owned subsidiaries of  Livspace, showed that itl reported a revenue of INR 80.17 Cr, a 96.3% Y-o-Y jump; with expenses of INR 225.73 Cr, a 66% Y-o-Y increase, and loss of INR 145.5 Cr, a 53.5% Y-o-Y increase, in the year ending March 31, 2019.

Livspace Cashes In On Design And Technology

Livspace target audience includes couples and affluent families with working professionals who have bought a new home or have existing homes with property values ranging between INR 40 lakhs and INR 4 Cr.

By connecting vendors and designers to homeowners, the platform is acting as a marketplace for home design. It charges a commission or margin fee for all transactions, which range from INR 1 Lakh to over INR 50 Lakh.

With average order value ranging between INR 10 Lakh and INR 12 lakh, Livspace’s price points can also go up to INR 50 Lakh per order, with smaller ticket orders starting at INR 1 Lakh.

The company’s major source of revenue is the sale of design services and handling fees. In FY19, through this Livspace earned INR 59.39 Cr, of which INR 15 Cr was commission income.

Further, the company added two new sources in FY19— traded goods and software development services— at INR 15.7 Cr and INR 44.18 Lakh respectively. Will these become the big drivers of revenue in the future as Livspace looks to cut its losses? It certainly needs to tend to the losses in its books.

The High Cost Of Technology-Led Interior Design

Earlier, talking to Inc42, Livspace’s Srivastava had said that the company has grown about 500% in the last 24-27 months and the impressive growth has also shown in the margins that the company earns, which he claims have improved from 18% to 40% in the same time.

But the costs of this growth has continued to rise. In FY19, the company burned INR 49.58 Cr on marketing expenses, a 1.35X Y-o-Y increase. Notably, the marketing expenses are 61.8% of the total revenue of the company.

Further, another major expense for Livspace is employee benefits, which increased 56.8% on a Y-o-Y basis reaching INR 97 Cr in FY19.

Srivatsa had told us that the company is unfazed by burgeoning losses. “Should we want to, we can become profitable but sometimes when you are building this kind of company, you are almost like an infrastructure company which requires more money being put back into the business,” he had said.

Going forward, leveraging omnichannel presence, Livspace is eyeing international as well as Indian expansion. The queries sent to Livspace on FY19 performance remain unanswered.

Update: March 11, 2020 | 12:03 PM

The above financial performance is for a single Livspace subsidiary, Home Interior Designs E-commerce Private Limited, and compares the FY18 and FY19 financials for this company alone. Livspace has clarified that Livspace Group has three entities – Home interior, e-homemaker and Livspace Pte.

The company told Inc42 that on a consolidated basis, its revenue for FY19 was INR 191 Cr, with expenses of INR 349 Cr leading to losses of INR 158 Cr. In context, for FY18, the company’s consolidated revenue was INR 105 Cr, with expenses of INR 206 Cr and losses of INR 101 Cr.

As part of their future growth, Livspace is looking at leveraging omnichannel presence with expansions both in the Indian as well as international markets.