Are We Getting Tired Of Bill Payment Solutions Yet?

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Since its acquisition by Axis Bank, Freecharge has experienced an impressive turnaround in the past five years. Axis Bank, India’s third largest bank had acquired Freecharge at its low point in FY18 when it had Rs 23 crore as income and posted a loss of Rs 81 crore. For the past five years, Freecharge records has shown a 12.5X improvement even as the company has been recording substantial profits.

According to Freecharge’s annual financial statement filed with the Registrar of Companies (RoC) for the financial year which ended in March 2022, the operating revenue of the company grew to Rs 287 crore, indicating a 23.2% growth.

According to the report, the business support transactional fees paid for the provision of financial and customer acquisition service to Axis Bank was the largest source of revenue for the company on FY22 as it accounted for 63.4% Freecharge’s total operating revenue. Comparative analysis shows a 3X increase from Rs 63 in FY21 to Rs 182 in FY22.

The report also shows that revenues collected from services associated with developing and managing technology products for the parent entity which was filed as TSP (technology service provider) plummeted in FY22 by 11.8% to Rs 65.61 crore. This collection accounted for 23% of Freecharge’s total operating revenue. Freecharge also received commissions of Rs 26 3 crore in FY22. This was described as checkout fees paid by merchants and it increased by about 64.5% from Rs 16 crore recorded in FY21.

Comparatively no revenue was recorded for wallet maintenance in FY22 whereas the company generated Rs 78.72 crore for same in FY21. The reason for this is that Freecharge has made wallet maintenance absolutely free for users in FY22.

Some of the services offered by Freecharge includes the provision of bill payments, mobile recharge, FASTag, and loan repayments services supported by pay layer UPI. The firm also offers instant loans and several investment options such as digital gold, fixed deposit and mutual funds. Freecharge has now partnered with Cashfree payments to support its users through BNPL which is a Buy Now Pay Later service with up to Rs 10,000 credit.

The bulk of Freecharge’s expenses emanated from employee benefits as this came to about 42% of the company’s annual expenditure. The cost of employee benefits in FY22 rose to Rs 108.54 crore, a staggering 16.4%.

Comparative analysis of FY22 shows that Freecharge’s income and expenses shows that the expenses soared at an alarming rate leading to a 38% decline in profits which sat at Rs 22.6 crore.

The company’s EBITDA margin and ROCE also declined to 13.92% and 12.78% respectively in FY22. A per unit breakdown shows that Freecharge spent about Rs 0.9 for every rupee generated in FY22.

The Freecharge deal with Snapdeal cost Axis Bank Rs 385 crore which is about $60 million in 2017. The company’s original owners Kunal Shah and Sandeep Tandon previously sold the platform to Snapdeal in April 2015 in a deal worth Rs 3,000 crore which amounts to $400 million.

As originally reported in (