Yes, you read that heading right and no, it isn’t $4.2 million and INR 1 Billion. Hike, a company that claims to have 100 million+ users on its platform, has a revenue that is less than the annual recompense of many mid-level executives in the corporate world — or heck, in Hike itself. This after having a valuation well in excess of $1 Billion.
The information comes via VCCircle, who cites research sourced from VCCEdge, the data research platform of News Corp VCCircle. Apparently, the company reported revenue from operations of merely INR 42.32 lakh for the year through March 2016. While this would lead to a great balance sheet for a brick and mortar store owner, better things were expected from Hike.
The cross-platform messaging service was found in December, 2012 and is a joint venture between Bharti Enterprises and SoftBank. The company has raised mulyiple rounds of funding with the most recent coming in the form of a $175 million (Rs 1,170 crore) injection from a groups of heavyweights including China’s Tencent Holdings Ltd, Taiwan’s Foxconn Technology Group and others.
The $175 million investment was made at a valuation of well over $1 Billion. However, while investments kept rolling in, the company’s costs have also climbed steadily.
While the total costs doubled to Rs 252.3 crore from Rs 126.5 crore over the course of a year, the marketing expenses registered a significant increase, reaching 130 crores! As the company took on more professionals, the staff costs also increased and reached a total of Rs 58.8 crore from Rs 25.1 crore a year ago.
On the other hand, total income was Rs 34.92 crore, while total losses stood at Rs 217.36 crore — having spiked by over 100 crores! This income was generated mostly by the sale of coupons and through games on the platform.
Meanwhile, the figures are certainly lopsided. A company that claims to have over 100 million users, that claims to transact over 40 billion messages a month — having a revenue of a mere 42 lakhs? However, the continued investor faith in the company is also in part due to the fact that such a performance is almost expected from an IM platform, in its initial days.
The service is essentially free and any money that is raised is through the voluntary participation of users in the purchase of coupons et cetra. This is extremely different from other business models that require you to compulsorily pay to use their services. Plus, Hike is ad-free, so that is another major source of revenue out of the way. Considering all these factors that leave the company with very little room to leverage, the 42 million revenue is somewhat less surprising.
With that said though, Hike is going to have to change its strategy. No investor is going to continue pumping in money into a company that continuously shows up with such financial affairs. They are in the business to make money after all and with 200 crore losses as compared to 42 lakh revenues, Hike is basically burning investor’s money to stay afloat.