Yubi, formerly known as CredAvenue, gained significant attention when Vivriti Capital sold a portion of its stake in the digital lending company at a valuation of $1.5 billion. However, despite the success of the secondary transaction for Vivriti, Yubi faced a significant downturn in its financial performance, with losses worsening by 8X in the fiscal year ending March 2023.
In this analysis, we will delve deeper into the company’s expense patterns, which contribute to its substantial losses. For now, let’s examine its revenue streams.
Yubi’s revenue from operations witnessed a substantial increase of 98%, reaching Rs 328 crore in FY23 from Rs 166 crore in FY22, as per the consolidated financial statements filed with the Registrar of Companies.
Yubi functions as a debt platform connecting businesses with banks and NBFCs, offering six distinct products, including a lending marketplace, a supply chain financing marketplace, and dedicated solutions for real estate and infrastructure financing. With over 6,200 investors and 17,000 active enterprises, Yubi claims to have facilitated credit worth Rs 1.4 lakh crore.
The breakdown of revenue indicates that 54% of the total revenue comes from income generated through merchant banking and other allied services provided to corporate borrowers and debt investors. Additional revenue drivers for Yubi include commissions on debt facilitation, collection solutions, and data collection.
Similar to many technology startups, Yubi’s employee benefits accounted for 48% of the overall expenses, experiencing a 4.7X surge to Rs 432 crore in FY23 from Rs 92 crore in FY22. This expense also included Rs 109 crore allocated for ESOPs (non-cash in nature).
The company’s overall expenditure, including business support services, information technology, travel, legal/professional, and marketing costs, escalated by 314% to Rs 895 crore in FY23 from Rs 216 crore in FY22.
Consequently, Yubi’s losses surged by 745% to Rs 482 crore in FY23 from Rs 57 crore in FY22. Its ROCE and EBITDA margin worsened to -30% and -105%, respectively. On a unit level, Yubi spent Rs 2.73 to earn a rupee of operating revenue during FY23.
While the revenue of Rs 328 crore may seem relatively small, Yubi operates in the vast debt syndication market in India. Although it’s premature to assess its operating metrics, the assumption is that with credit arrangements totaling almost $18 billion, the company will continue to improve based on accumulated learnings and data. In a market where experience is crucial, Yubi’s three years or more in operation position it to withstand competition and potential disintermediation risks.
