Smallcase Invests INR 176 Crore and Yields INR 31 Crore Returns

Smallcase logo

Three points you will get to know in this article:

  • A 50% increase in platform fees drove 39% of Smallcase’s revenue in FY23.
  • However, a surge in employee benefits and other expenses led to a 400% increase in losses, amounting to Rs 133 crore in FY23.
  • Founders and co-founders hold 19.5% shares in smallcase, with PeakXV as its primary external stakeholder.

Introduction: Smallcase

The company smallcase, established in July 2015 by three IIT Kharagpur graduates, aims to use technology to introduce a new generation of investors to the Indian equity markets. They are based in Bangalore and consist of finance professionals, engineers, and designers with diverse backgrounds and skills who create products that are used everyday by the most respected brands to enhance customer experience.

Revenue Breakdown and Growth Drivers

In the company’s financial landscape, a significant chunk of revenue, specifically 39%, was sourced from platform fees collected from users. This marked a noteworthy increase of 50% to reach Rs 12 crore in FY23. The remaining portion of the revenue stream flowed in from subscriptions (particularly Tickertape Screener), transactions, and various complementary services.

Surging Employee Benefits Expenditure

When scrutinizing expenditures, it’s evident that employee benefits took the lead as the most substantial cost component, constituting 47% of the total expenses. This outlay experienced a considerable surge, jumping by a staggering 69.4% to hit Rs 83 crore in FY23, compared to Rs 49 crore in the preceding fiscal year, FY22.

Steady Advertising Expenditure and Escalating Total Costs

Interestingly, the advertising expenditure remained steady at Rs 66 crore throughout the previous fiscal year, FY23. The surge in technology costs, coupled with legal-professional expenses and other overheads, triggered Smallcase’s total expenditure to escalate by 34.35%, reaching Rs 176 crore in FY23 compared to Rs 131 crore in FY22. This rise in costs, combined with stagnant revenue, resulted in the company’s losses ballooning by 400% to Rs 133 crore in FY23 from Rs 95 crore in FY22. The return on capital employed (ROCE) plunged to -76%, and the EBITDA margin plummeted to -300%. On a unit basis, the company spent Rs 5.69 to earn a single rupee in FY23.

Funding Rounds and Major Stakeholders

Smallcase has secured $70 million in funding across various rounds, including a significant $40 million Series C raise in August 2021. Our analysis identifies PeakXV as the leading external stakeholder in Smallcase, holding a 17.67% stake, trailed by Faering Capital and Blume Ventures. Collectively, the company’s co-founders Vasanth Kamath, Anugrah Shrivastava, and Rohan Guta hold a combined stake of 19.5% in the company.

In FY23, Smallcase derived 39% of its revenue from a 50% increase in platform fees to reach Rs 12 crore, while the rest came from subscriptions, transactions, and complementary services. Employee benefits, comprising 47% of total expenses, surged by 69.4% to Rs 83 crore. The company’s total expenditure escalated by 34.35% to Rs 176 crore, leading to a 400% increase in losses to Rs 133 crore. Smallcase secured $70 million in funding, with PeakXV as the leading external stakeholder holding a 17.67% stake, while the co-founders collectively hold a 19.5% stake.

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