Indian Startup Cashfree Achieves Profits Continually

Cashfree, a start-up who has Y Combinator as its parent company, takes the privilege to announce itself as a profit-making entity right from its inception, which is normally a rare sight in the world of start-ups. The company works towards easing the process of payment and from a single payment disbursal service the firm climbs up to introduce eight different features for its customers which include salary disbursal, instant refunds, subscription payments, marketplace commission settlement, and others. Going deeper into its profit-making ability the company claims to make profits for the last three fiscal years, FY18-20 recorded a noteworthy growth in the organization. 

The company made a significant leap towards its profit-making journey and accumulated an operating revenue of Rs 7.14 crore during FY18, and a 7X year on year increment in revenue was recorded. In the fiscal year FY19, revenue saw a hike of 4X to 27.8 crores as it introduced payment APIs for its clients which included some of the top players in the market like the CRED, Xiaomi, and Zomato.

The company in its statement said that this growth was accelerated by their bulk disbursement product “payouts,” which was brought into use by at least 5,000 businesses to initiate vendor payments, refunds, pay wages, disburse loans, reimburse expenses and much more. The company saw the same trend line as growth continued to move up during FY20 and it made transactions of around Rs 90,000 crore and operating revenue too rose up to 3.6X on a year-to-year basis which amounted to Rs 99.43 crore.

Unlike other players in the market who had to make expenditures to generate revenue or profit, Cashfree has a very different story to tell with its total expenditure which grew 14.1X from Rs 5.2 crore in FY18 to Rs 73.5 crore in FY20, it is at par with the overall growth in revenues. The good profit records helped the company to make its expenditures from the revenue generated through the business and reinvest the same in the company. The Net cash flow from operations saw a spike of 36.5X times that is from a nominal amount of Rs 2.63 crore in FY18 to Rs 96.12 crore.

The payment gateway’s expenses can be termed as the biggest expense incurred by the Bengaluru-based company throughout the FY18-FY20, which amounted to 75% of the total expenses made by the company. Cashfree works with around 130 employees, as their team members and makes an expense of around Rs 13.34 crore on employee benefit expenses during FY20, which too recorded a growth of 16.7X from an expenditure of only Rs 80 lakhs in FY18.

The company was founded by Akash Sinha and Reeju Datta. The fundings in the start-up came from its Series A round which was led by South Korean VC Smilegate, other than that its increment in collections helped its assets to witness growth from Rs 8.8 crore in FY18 to Rs 258 crore at the end of FY20. 

The total amount of current assets by the company is around 99.3% on top of that Cashfree could also make a profit(after tax) of  Rs 1.4 crore during FY18, this went up to 14 folds and amounted to Rs 19.54 crore during FY20. The company enjoys a plus point of fewer assets which results is lesser fixed costs for the company this helps Cashfree to increase or decrease its operations accordingly without any hurdles.

Citing an example to it the company made a 3.6X times growth in its gross sales in FY20, which resulted in an improved Net Profit margin from 14.7% to 19.4% in FY19. For start-ups prioritizing profits in the early years is not very common but a good return helps businesses to grow without the help of investors. Cashfree has been able to survive because of its lucrative business set up, whereas players in the same field like PayU, Paytm and Razorpay had to bear the burn of losses and are still waiting to make a profit out of their payment gateway business. Cashfree has been doing very well in its business and the profit generated is just outstanding for the last three fiscal years.

The company has also made its progress towards other verticles and has introduced eight new features that have increased the company’s list of offerings. Cashfree stands as an example that startups can really perform well and can experience growth with the profit generated in the business.