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Fintech unicorn BharatPe clocked 3x jump in losses to ₹5,584 crore in FY22 due to a change in the fair value of the company’s compulsory convertible preference shares (CCPS) amounting to ₹4,782 crore.
“This is not an operating loss but only a change in the fair value. Excluding this, operating loss was ₹811 crore in FY22, as compared to ₹277 crore in the previous financial year. This item is a one-off and shall not be there from next year as we have now reclassified the compulsory convertible preference shares from liability to equity,” said Nalin Negi, BharatPe’s CFO and interim CEO.
Investment conditions
He added that when start-ups raise funds through compulsory convertible preferred shares, normally the investors put conditions like if they don’t do certain things, the money is refundable. “So, the funding amount becomes a liability rather than an equity contribution to the business. In our case, it was something similar. All the funds that we had raised in the past till series E were considered as liability,” said Negi.
In the previous financial year, on August 3, 2021, BharatPe fair valued the liability and booked the increase in valuation to the extent of ₹4,782 crore into its P&L. Later, on August 4, it converted the compulsory preference shares into equity and re-classified them from liability to equity.
“Companies do this at some point of time. Now that we have classified it as equity, in the next financial year, we will not be doing this. There’s no money to be returned to anyone. Their money is in the company,” Negi added.
Revenue growth
The fintech company reported a 169 per cent growth in revenue to ₹321 crore, from ₹119 crore eported last year. “As a four-year-old start-up, BharatPe continues to invest in new businesses. Some of these businesses like PostPe (started in second half of FY22) and scaling up of Swipe business, which started a year earlier, are still in an investment phase and therefore impacted the short-term operating performance,” said a BharatPe spokesperson added.
BharatPe said it is facilitating ₹350 crore a month in disbursals on an average in the last fiscal, and today, its monthly disbursal is at around ₹1,200 crore across all the products. The company also said it has facilitated disbursals of around ₹4,500 crore in 2021-22 and is on track to do ₹15,000 crore across the merchant and consumer side this year and remain on track to be operationally positive in the next few months.
Commenting on the company’s IPO timeline, Negi said, “IPO is definitely a focus for the company but it is not the only objective. The objective is to grow BharatPe and we have been very clear that we will do an IPO when we become profitable and are able to show consistent performance. IPO timing is also dependent on what is the state of the market at that point in time. So I would say that company is working towards being IPO ready, but when the IPO happens depends on what is happening in the market.”
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