BharatPe is again in the limelight due to a massive jump in its revenue. It earned Rs.456.8 crore in FY 2022. Sounds good! But not much. Because the loss widens equally. Do you know its loss increased to Rs.5594 crore? In this article, you will get a thorough breakdown of the financials of BharatPe revenue (FY 2022). We will also explain the root cause of its large losses inspite of high revenues.
BharatPe Revenue Breakdown
Despite being surrounded by controversies, the company managed to retain its financial health through its various revenue sources. Like Cred, Mensa, Upstox, etc. BharatPe is also backed by an international investment company- Tiger Global. Bharatpe is mainly involved in conferring aggregator services to various merchants or businessmen. It offers a unified QR code through which you can push payments through UPI applications too!
In the following table, we have provided the details of BharatPe Revenue sources. Also, you will see the amount of revenue collected through them.
|Revenue Sources||Revenue Earned|
|Commission Income||Rs.151.85 crore|
|Transaction fees, Fixed rental charges, and Point of Sale Machines||Rs.126.82 crore|
|Loyalty Points & Related Services||Rs.108.5 crore|
|Other Operating Revenue||Rs.69.93 crore|
1. Commission Income
Commission income turns out to be the major revenue source of BharatPe. As you know BharatPe acts as a facilitator for lending partners like financial institutions. In case you are in urgent need of capital, you can get small-ticket loans through it. And thus, BharatPe earns a fat commission through it. The BharatPe Revenue through commission income soared to Rs.151.85 crore.
2. Transaction Fees and PoS (Point of Sales Machines)
This is the second major BharatPe revenue source. It involves transaction fees with settlement charges, and fixed rental charges for using Point-of-Sale (PoS) and speakers. Point of Sale refers to a place where you can carry out the retail transaction. It earned a revenue of Rs.151.85 crore through transaction fees and PoS.
3. Loyalty Programs & Related Services
It is considered one of the most impressive features of BharatPe. You can earn reward points through these loyalty programs. It earned Rs.108.5 crore through it. IN 2021, BharatPe launched the loyalty programs under the guidance of its co-founder Ashneer Grover. It aided the business growth of its merchant partners through these loyalty programs.
4. Other Operating Revenue
Besides its operating income, it earned Rs.69.63 crore from other services like advertisement, memberships, deposits, investments, etc. One of the chief products of BharatPe that conferred a significant amount of revenue was the 12% club app. It is a P2P (Peer to Peer) financing app with which you can borrow money directly from peers. You do not have to go to any middlemen or banks. This app connects borrowers to lenders (investors) without the involvement of any middlemen.
Image Source: Entrackr
A deep insight into BharatPe’s ballooning losses
Huge expenses and CCPS are the two big reasons behind the whopping losses of BharatPe. We have described them in the following sections.
As compared to FY 21, the BharatPe revenue for this year (FY 22) increased by 169%. But still, it accounted for a loss of Rs.5594 crore. How? You may wonder. One of the chief reasons is its sky-touching expenditure. The cash outflow of BharatPe has increased due to its expenses. The number of expenses for FY22 exceeded Rs.1483 crore as compared to FY 21’s expenses worth Rs.462 crore.
Here is a detailed breakdown of expenses-
|Financial Guarantee Expenses||Rs.266.6 crore|
|Marketing and Business Promotion||Rs.245.5 crore|
|Transaction Processing Charges||Rs.227 crore|
|Employee Benefit Expense||Rs.184.8 crore|
|Outsourced Service Cost||Rs.168 crore|
|IT and Communication Expenses||Rs.105.6 crore|
|Other Expenses||Rs.285.6 crore|
The expenses and cash outflows of BharatPe exceeded three folds as compared to last year.
As you can see, the highest expenditure of BharatPe was “Financial Guarantee Expenses.” In the financial year 2022, it observed a sharp rise in Financial Guarantee Payments to lending partners and transaction processing fees. It accounted for nearly 18% of the total expenses. Even though BharatPe claims a monthly loan disbursal rate of Rs.1200 crore (approx.) for all its products but still couldn’t make up for the losses. Despite facing a huge rise in expenses, they are anticipating being on the operationally positive side of the business in the upcoming months.
2. Change in Fair Value of CCPS (Compulsorily Convertible Preference Shares)
Preference Shares are a financial instrument that helps companies to raise capital. It also gives the dividend option for shareholders. Then, how this instrument triggered the losses of BharatPe revenues? For this, you need to dig deep into the world of share markets.
The financial instrument CCPS or Compulsorily Convertible Preference Shares is used to raise funds from investors. However, it is not a smooth financial instrument. It has lots of conditionalities attached to it. Those conditions may range from repayment or buyback, even if the startup or business is unable to reach its milestones. That seems more like a liability and less like an asset. Isn’t it? Well, there is more to it! Whenever there is an IPO, then this instrument can also be converted into standard equity shares.
According to the Ind AS, any change in the fair valuation of CCPS has to be recognized as a liability. (Ind AS refers to Indian Accounting Standards). Let me break this complicated sentence into simple words. Suppose, if your company’s valuation rise from $1 billion to $3 billion in the current financial year. And the value of CCPS also rises from $1000 to $3000. Then, by default, you need to recognize the additional $2000 as a liability for the current financial year. Because the buyback’s value also increased simultaneously.
It leads to huge losses in the balance sheets of startups or companies. This same thing has happened with BharatPe! The change in the fair value of CCPS has led to a considerable loss of BharatPe revenue.
BharatPe has seen numerous ups and downs in the last few months. Other than high revenue earnings and losses, it saw high-level exits. It includes the court case and ousting of its co-founder Ashneer Grover for financial misappropriation. All these factors led to humongous losses inspite of impressive Bharatpe revenue.