The Indian authorities have consistently maintained a contentious relationship with cryptocurrency. With the recent imposition of a 30% tax on gains from crypto exchanges, numerous companies operating in this sector experienced significant setbacks. One such affected startup is CoinSwitch, which reported revenue of Rs 45.6 crore during FY23.
CoinSwitch, previously valued at over $1 billion, witnessed an 81.7% decline in revenue from operations, dropping from Rs 248.6 crore in FY22 to Rs 45.6 crore in FY23, as per its consolidated financial statements filed by the group company in Singapore.
CoinSwitch operates as a cryptocurrency exchange and trading platform, offering products such as the Crypto Rupee Index (CRE8) and a Systematic Investment Plan (SIP) for consistent crypto investment.
The primary source of income for CoinSwitch comes from commissions earned through the sale and exchange of Virtual Digital Assets (VDAs). Additionally, the company generated Rs 50.76 crore from interest (non-operating), bringing its total income to Rs 96.35 crore in FY23.
Employee benefits represented the largest portion of expenditure, accounting for 53.6% of overall spending. This expense increased 2.15 times to Rs 258.5 crore in FY23 from Rs 119.8 crore in FY22.
Other expenses including business promotion, information technology, legal cum professional fees, and overheads, amounted to Rs 481.9 crore in FY23, down from Rs 763.4 crore in FY22.
Despite significant revenue decline, CoinSwitch managed to control its costs, resulting in a 24.9% reduction in losses, from Rs 513.1 crore in FY22 to Rs 385.4 crore in FY23.
The company’s ROCE and EBITDA margin stood at -24% and -396.3%, respectively, with an expenditure of Rs 10.57 per rupee earned in FY23.
Having raised over $300 million across various funding rounds, including a $260 million fundraise from investors like Andreessen Horowitz (a16z) and Coinbase Ventures in October 2021, CoinSwitch entered the unicorn club. Peak XV is the largest external stakeholder with 15.77% ownership, followed by Paradigm, Ribbit Cayman, and Coinbase Global Inc.
Despite the high interest income suggesting a well-capitalized firm, the volatility of the cryptocurrency market and the persisting tax challenges raise questions about the sustainability of many firms. While the recent resurgence in Bitcoin offers hope for recovery, the tax situation remains a significant hurdle. CoinSwitch faces the challenge of crafting a survival strategy to navigate these periods of uncertainty and mitigate the impact of high taxes.
