Cashfree Payments, one of the major players in the digital payments space, reported flat revenue growth for the fiscal year ending March 2024. The company’s revenue from operations increased by a modest 4.7% to ₹642.7 crore, up from ₹613.8 crore in the previous fiscal year. The reason for this stagnant growth can be attributed mainly to the significant regulatory barrier: RBI has banned onboarding of new merchants from December 2022 to December 2023.
PC: The Financial Express
Cashfree has managed to maintain a steady revenue stream despite the challenging environment. The company has not raised any fresh capital in the last 30 months, and non-operating income from bank deposits and income tax refunds have been minimal at ₹2.1 crore. In aggregate with its operational revenue, Cashfree reported a total revenue of ₹644.8 crore for FY24.
Since the company did not explicitly break down revenues for the fiscal year, it has communicated that most revenues are transaction-based fees, of which transaction-based fees are primarily made as percentages of payments and disbursements. Other services include business payouts, and this model therefore shows that the firm relies heavily on strong transaction volume to keep its revenue growth intact.
On the cost side, material cost remained the biggest item of cost which stayed flat at ₹426.6 crore. Employee benefit expenses continued to increase and rose to ₹245 crores in FY24 after spiking 23%. Other costs, including merchant discount rate, infrastructure, and compliance, added up to a gentle increase in total costs, which stood at ₹779.43 for the fiscal year. Thus, cashfree’s losses stood marginally at ₹135 crore while it was at ₹133 crore in FY23.
Cashfree is at a disadvantage in a competitive market, as it is still a new player against such stalwarts as Razorpay, PayU, and CCAvenue. More recently, Razorpay generated ₹2,068 crore in revenue from its payment gateway business and reported profit after tax of ₹34 crore for the last fiscal year. On the other hand, PayU had only an 11% revenue growth to $444 million, which also suffered losses to illustrate the level of competition that prevails in the market for digital payment providers.
Cashfree’s fundraise history speaks volumes for the growth path. This Bengaluru-based firm has collectively raised around ₹321.57 crore ($42 million) since its inception in 2013. But there was no new fund raise from the company after June 2021 when the last tranche of its Series B funding was completed. In Series B, Cashfree raised $35 million back in November 2020, raising big questions on a chasm in its capital raises which questions its agility.
The company is reportedly holding negotiation fresh equity for the next round while no confirmation available yet for the deal to happen. It must get some acceleration ahead going through this fiscal and as such should compare to the immediate past also. It is, however indeed hoped that after acquiring PA and PPI licence now made effective recently should augment growth positively for FY25. These licenses will add value to the services offered by Cashfree and increase its market penetration, thus setting up the company for better performance in the next year.
In summary, while Cashfree is passing through this flat growth period and regulatory challenges, strategic focus on new licenses and possible capital infusion may lead to better operational performance and revenue generation in the near future.
