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Instamojo charts revival story, hits cash flow positivity in July 2020

Jul 07, 2020 03:44 PM IST

Looking to make net profits by the end of the current financial year.

Bengaluru-based Instamojo, which was almost written off a couple of years back, has come back from the brink and how!

The eight-year-old start-up made money for the first time in July 2020 and is now aiming to make net profits by the end of the current financial year. In the cash- guzzling start-up ecosystem, Instamojo stands out. What is more important here is that Instamojo is running ahead of its scheduled targets.

How did it get back its mojo? Sampad Swain, chief executive, said that COVID-19 and the lockdowns have been ‘demonetisation 2.0’ for his start-up. What demonetisation has done to digital payments, COVID-19 has done to the digitisation of small businesses, and the Kalaari Capital and Blume Ventures- backed firm has taken full advantage of the scenario.

The company is growing without spending any advertisement dollars and new customer acquisition is happening organically. “In early 2020, one of my co-founders foresaw the potential impact of COVID-19 and we have been on a cash-saving mode since then. What we had not foreseen was this sudden demand for online services from small businesses,” Swain told Moneycontrol.

He took to Twitter to announce cash flow positivity and his growth rates across business verticals and fellow entrepreneurs were quick to laud the achievements.

Words of praise from Paytm founder Vijay Shekhar Sharma to Mobikwik co-founder Upasana Taku to even Jupiter founder Jitendra Gupta appeared on Twitter.

With spirited founders determined to get bigger in the hyper competitive start-up world, can Instamojo be the Shopify of India? Perhaps it is still too early, but given the growth projections of the company, pundits might hazard an affirmative response.

Swain believes that the momentum will survive. After all, they are on-boarding close to 1,500 merchants everyday over the last three months, reaching a merchant base of 13 lakh. So, why not gear up for more scale in the future?

“If these businesses are coming online, they will sell something and we are only going to gain from their growth; we have all products needed to support them,” he said.

From starting with a payments link via SMS, Swain and team has today expanded into a full-fledged service platform for micro entrepreneurs. Want to build a website? Accept orders online? Accept payments? Want to ship goods to customers? Need a business loan to expand operations? Instamojo today has all the solutions.

Swain does not intend to stop here. He is also looking to invest in other start-ups in complementary businesses to grow the product catalogue further. The aim is to become a one-stop shop for everything related to Micro, Small and Medium Enterprises (MSMEs).

“We used to get 100 percent revenue from payments. Now that has gone down to 70 percent. The rest comes from e-commerce and lending. Our aim is to bring it down to 50 percent,” said Swain. With revenue opportunities in lending and e-commerce bigger, Instamojo has doubled its gross margins to 60 percent from 30 percent during pre-COVID days itself.

Gross margin is the net sales revenue minus the cost of goods expressed in percentage terms.

The Indian e-commerce market is worth around $30 billion, as per Swain's estimates. With a run rate of $300 million of gross merchandise value, Instamojo still has 1 percent market share.  Swain believes this shows the market opportunity.

Food and retail sectors have grown almost five times, edutech businesses have grown 2.5 times, and financial services and events have doubled. Travel is the only sector which has slumped and is not showing signs of recovery across the world. Similar trends are being reflected on the Instamojo platform as well.

Instamojo has been charting an interesting revival and growth story over the last year or so. The start-up, which was founded in 2012, has till date raised only $11 million, of which $7 million was raised through the Series B round in 2019.

Besides Blume and Kalaari, Instamojo is backed by Japanese investors AnyPay, Gunosy Capital, ex-Googler Rajan Anandan and the top executive of a Singapore-based hedge fund, Rashmi Kwatra, who has invested in her personal capacity.

“We will not need equity capital now. If we raise funds, we will only do that for expanding into newer geographies or for strengthening our ecommerce business,” said Swain.

Pratik Bhakta
first published: Jul 7, 2020 03:44 pm
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