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Freecharge scale grows 12.5X since its acquisition by Axis Bank

Freecharge seems to have had a significant turnaround under the Axis Bank umbrella in the last five years. The third-largest private bank acquired Freecharge in FY18 when the latter had an income of Rs 23 crore and Rs 81 crore loss. <br>

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Freecharge scale grows 12.5X since its acquisition by Axis Bank

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  1. Freecharge scale grows 12.5Xsince itsacquisitionbyAxis Bank FreechargeseemstohavehadasignificantturnaroundundertheAxisBankumbrellainthelastfiveyears.Thethird-largestprivatebankacquiredFreechargeinFY18whenthelatterhadanincomeofRs23croreandRs81croreloss.Butovertheyears,Freecharge’sscalehasspiked12.5Xsincethen,allthewhilemakingsomeprofit. Freecharge’soperatingrevenuegrew23.2%toRs287croreduringthefinancialyearendingMarch2022,asperthecompany’sannualfinancialstatementswiththeRegistrarofCompanies(RoC). BusinesssupportfeescollectedforprovidingfinancialandcustomeracquisitionservicestoAxisBankfoundtobethelargestsourceofrevenueduringFY22forming63.4%ofthetotaloperatingrevenue.Thesecollectionssoaredalmost3XtoRs182croreinFY22fromRs63croreinFY21. CollectionsfromprovidingservicesinrelationtothedevelopmentandmanagementoftechnologyproductsfortheparententitybookedasTSP(technologyserviceprovider)declined11.8%toRs65.61croreinFY22andaccountedfor23%ofthetotaloperating

  2. revenue.Thecompanyalsocollectedcommission(chargedfrommerchantsascheckoutfees)ofRs26.3croreinthelastfiscalwhichsurged64.5%fromRs16croreinFY21.revenue.Thecompanyalsocollectedcommission(chargedfrommerchantsascheckoutfees)ofRs26.3croreinthelastfiscalwhichsurged64.5%fromRs16croreinFY21. Importantly,revenuefromwalletmaintenancestoodnilduringFY22ascomparedtoRs 78.72croregeneratedfromthesameinFY21.ThisrevenuehasbecomezeroasthefirmmadeitfreeforusersinFY22. Freechargeprovidesmobilerecharge,billpayments,FASTag,OTTandloanrepaymentservicesalongwithpaylaterUPI,instantloans,andinvestmentoptionslikemutualfunds,digitalgold,andfixeddeposit.ItrecentlypartneredwithCashfreePaymentstofacilitateitsuserswithBuyNowPayLater(BNPL)servicesuptoRs10,000. Movingtotheexpenseside,employeebenefitsexpensewasthelargestcostcenterforthecompanycontributingnearly42%totheannualexpenditure.Thiscostincreased16.4%toRs108.54croreinFY22.

  3. Advertisingandpromotionemergedasthesecondlargestexpensewhichspiked62%toRs49.4croreinFY22.Othermajorcostelementssuchaslegal-professionalandsoftwareexpensessurged352%and20%toRs17.64croreandRs12.85crorerespectivelyduringFY22.Advertisingandpromotionemergedasthesecondlargestexpensewhichspiked62%toRs49.4croreinFY22.Othermajorcostelementssuchaslegal-professionalandsoftwareexpensessurged352%and20%toRs17.64croreandRs12.85crorerespectivelyduringFY22. DuringFY22,Freecharge’stotalexpenditurespikedby40.8%toRs259croreascomparedtoRs184croreinFY21. Unlikeitsincome,Freecharge’sexpensessurgedatahigherpacewhichcauseda38%dropinitsprofitstoRs22.6croreinFY22.ItsEBITDAmarginandROCEdeterioratedto13.92%and12.78%inFY22.Onaunitlevel,thefirmspentRs0.9toearnarupeeofoperatingrevenueinFY22. AxisBankacquiredFreechargefromSnapdealinaRs385crore($60million)dealinJuly2017.Beforethat,Freecharge’soriginalfoundersKunalShahandSandeepTandonsoldthewalletplatformtoSnapdealforaboutRs3,000crore($400million)inApril2015.

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