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Q3 sees startups turn a profitable corner

By Aryaman Gupta
February 23, 2024 12:57 IST
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The third quarter (Q3) of 2023–24 (FY24) has proven to be pivotal, witnessing some startups turning profitable and others enhancing their performance as their businesses finally begin to deliver.


Illustration: Dominic Xavier/

Startups like Delhivery, Zomato, PolicyBazaar, Mamaearth, and Nykaa have either become profitable or improved their profit margins in Q3FY24.

A renewed focus on profitability, supported by operational efficiencies, expense rein-in, and robust demand during the festival season, has empowered companies to strengthen their performance.


What is noteworthy is that analysts are now viewing these new-age businesses with optimism, a shift from the caution observed previously.

Among those achieving profitability for the first time are logistics unicorn Delhivery and financial technology startup PolicyBazaar.

Delhivery reported a profit after tax of Rs 11.7 crore in Q3, an improvement from the Rs 196 crore loss during the same period a year ago.

It had recorded a loss of Rs 103 crore in the previous quarter.

The company registered a 20 per cent year-on-year (Y-o-Y) growth in revenue, reaching Rs 2,194 crore in Q3, driven by express parcel and part truckload (PTL) segments.

Express parcel services grew by 18 per cent to 201 million shipments, and the PTL segment expanded by 37 per cent to 354,000 tonnes on a low base.

PB Fintech, PolicyBazaar’s parent firm, reported a consolidated net profit of Rs 38 crore for the quarter that ended December, a positive shift from a loss of Rs 87.3 crore a year ago, propelled by growing demand for insurance.

Revenue from its core online businesses, PolicyBazaar and PaisaBazaar, rose by 39 per cent to Rs 593 crore.

In comparison, new premiums for health and term insurance businesses grew by 44 per cent, the company reported.

Although total costs rose nearly 21 per cent, advertising (ad) and promotion expenses decreased by 28 per cent compared to a year ago.

According to brokerage firm JM Financial, improvements in earnings before interest, tax, depreciation, and amortisation (Ebitda) were “attributable to new initiatives breaking even at the contribution margin level.

"This was driven by the company’s strategic focus over the past quarter to onboard retail agents in the PBPartners business”.

Among those expanding their profit margins is the food aggregator platform Zomato.

The Gurugram-based firm reported its third consecutive quarter of consolidated profits at Rs 138 crore in Q3, up from Rs 36 crore in the previous quarter and a loss of Rs 347 crore during the corresponding period last year.

Zomato’s adjusted Ebitda, including its quick commerce business Blinkit, was positive for the third quarter in a row at Rs 125 crore, compared to Rs 41 crore in the second quarter.

“Be paranoid about driving innovation and disruption, or someone else will,” Zomato chief executive officer (CEO) Deepinder Goyal wrote in a letter to shareholders.

“What else could otherwise explain the rapid progress that Zomato has made in such a short span?” wrote brokerage firm Jefferies in a note.

The analysts noted that gross order value grew by an impressive 28 per cent quarter-on-quarter (Q-o-Q), supported by the festival and seasonal demand tailwinds, a sharper assortment, and better service levels.

A Nomura report on Zomato said: “We note that Zomato’s high growth path with improving profitability has significant room to go in both the food delivery and quick commerce businesses.”

Improvements in the platform’s ad monetisation led to a consistent Q-o-Q increase in ad revenue per order over the past several quarters, while the introduction of a platform fee for all customers, including Gold members, in July 2023 also contributed to margin improvement.

Honasa Consumer, the parent firm of direct-to-consumer brands such as Mamaearth, The Derma Co, and BBlunt, reported a 264 per cent Y-o-Y increase in its net profit to Rs 25.9 crore in Q3. The company had posted a profit of Rs 29.4 crore in the previous quarter.

“We are seeing leverage on two fronts.

"As we are scaling overall, both our ad expenses and our operational expenditure are growing at a much slower pace, leading to improvements in Ebitda,” Varun Alagh, chairman and CEO, Honasa Consumer, told Business Standard.

Honasa saw its sales rise by 28 per cent Y-o-Y during the quarter, driven by festival season sales.

Its consolidated Ebitda grew by 192 per cent Y-o-Y at Rs 34.5 crore.

“Honasa’s Q3FY24 report was above expectations. Revenue did not disappoint the strong ask included in our forecasts and was volume-driven.

"Mamaearth continued to deliver a resilient performance led by offline channel scale-up whilst the newer brands grew at a strong clip online, albeit on a low base,” analysts at JM Financial wrote in a note.

Mamaearth’s listed competitor, FSN E-Commerce Ventures, the parent company of beauty and fashion brand Nykaa, also reported a 106 per cent Y-o-Y increase in its net profit to Rs 17.5 crore for the October-December quarter.

The company had posted a profit of Rs 7.8 crore in the previous quarter, according to regulatory filings.

“We continue to drive improvement in profitability.

"Ebitda margin expanded to 5.5 per cent for the quarter, a growth of 26 per cent Y-o-Y driven by direct and indirect cost efficiencies,” Nykaa said in a statement.

Nykaa’s flagship ‘Pink Friday Sale’ in November 2023 pulled in record numbers and bolstered sales during the quarter.

Sales in its beauty category jumped tenfold over 10 years during the event, while fashion gross merchandise value increased twofold over two years, the company said.

Footfall in its retail stores during the event increased by 50 per cent compared to regular days.

Furthermore, the company was able to rein in fulfilment and employee expenses.

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Aryaman Gupta
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