Open, a neo-banking platform, achieved unicorn status following a $50 million funding round led by IIFL, with Tiger Global also participating, in May 2023. Despite its prestigious status and substantial funding, questions lingered about the scale and profitability of the seven-year-old company, evident in its enterprise value to revenue multiple of 260X until March 2023 (FY23).
Open’s operational revenue experienced a modest 25% growth to Rs 30 crore in FY23 from Rs 24 crore in FY22, as per its consolidated financial statements filed with the Registrar of Companies (RoC).
For context, Open reported revenue of Rs 40 crore in FY22. The variance in revenue figures for FY22 can be attributed to changes in accounting standards and revenue recognition methods.
Founded in 2017, Open offers banking, payment, and accounting solutions to small and medium businesses, with subscription sales through its software and commissions from customer transactions being its primary revenue streams.
Additionally, it generated Rs 23 crore from interest on deposits and current investments (non-operating), bringing its total revenue to Rs 53 crore in FY23.
Employee benefits accounted for 50% of Open’s overall expenditure. This cost increased by 33% to Rs 149 crore in FY23 from Rs 112 crore in FY22, which also includes Rs 40 crore as ESOP cost (non-cash).
The company’s expenses, including information technology, advertising, legal, payment gateway, card issuing, and other overheads, totaled Rs 296 crore in FY23, up from Rs 217 crore in FY22.
Open’s increased expenses and modest revenue growth led to a 37.5% rise in losses, reaching Rs 242 crore in FY23 compared to Rs 176 crore in FY22. Its ROCE and EBITDA margin were -50% and -394%, respectively.
As of March 2023, Open’s total current assets were Rs 332 crore, including a cash and bank balance of Rs 311 crore. On a unit level, it spent Rs 9.87 to earn a rupee in FY23.
Having raised over $180 million to date, Open’s largest external stakeholder is currently Beenext at 11.72%, followed by Tiger Global and Unicorn India Ventures.
Despite investor confidence, questions persist about Open’s sustainable business model, particularly in India’s MSME sector, known for challenging commercial success. The narrative that attracted significant funding remains a puzzle, especially considering the sector’s history of failed startups despite high valuations. Time will tell if Open can unlock its secret to success.
