Pratilipi closing in on Rs 30-crore funding round as KPMG flags runway problem in audit report

Pratilipi has raised more than $80 million in funding from investors like Tencent, Nexus Venture Partners and Omidyar Network

Vernacular content startup Pratilipi said that it is closing in on a Rs 30-crore funding round and is poised to become cashflow positive in the first quarter of FY25, after its auditor KPMG flagged its runway to be a matter of concern in the Tencent-backed company’s audited annual financial report.

"During the current year, the Company’s performance has been significantly impacted due to operational expenditures largely on account of salaries and business promotion expenses. As a result of the aforesaid matters, the Company has incurred losses in the current year amounting to Rs 152.6 crore and has accumulated losses of Rs 502.27 crore as at 31 March 2023," KPMG said in its audit commentary.

"The Company has also projected losses, including cash losses, in the FY 2023-24 in its approved business plans. These matters indicate that there is a material uncertainty related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern, and therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business," the audit major added.

According to Pratipili’s annual financial statement sourced from PrivateCircle Research, the company’s employee benefit expenses rose 106 percent to Rs 59.4 crore in FY23, while business promotion spends declined 56 percent to Rs 50.8 crore.

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The company saw its revenue rise 346 percent to Rs 34.8 crore in FY23, while net loss narrowed from Rs 196.4 crore to Rs 152.6 crore. The company said that it is on track to grow revenue by 2X to Rs 70 crore in FY24, with net loss expected to come down sharply.

“As per standard protocols, Statutory Auditors have to extrapolate metrics by doing sensitivity analysis typically a month before the signing date. Further, they have to be risk averse (and in our opinion rightly so), subsequently any contracts signed after that date or any contracts -including a term sheet- which are non-binding in nature aren't considered in the report,” said Ranjeet Pratap Singh, CEO and founder of Pratilipi.

“As noted in the Auditor's report itself, our operational revenue for FY '23 increased to Rs 34.8 crore which was 342 percent higher than FY22, while we also controlled our net loss by 22 percent over the same period. For FY24, we are on track to do ~Rs 70 crore in operational revenue with net loss further reducing by ~65 percent. We expect to become both profitable and cash flow positive in Q1 FY25 (April-May-June quarter in 2024),” he added.

Singh further noted: “We are also closing an investment round of up to Rs 30 crore (out of which Rs 13.5 crore is already received in the company's bank accounts) with the rest expected to close by the end of this quarter. This gives us enough buffer on our path to be both profitable and cash-flow positive.”

Pratilipi has raised more than $80 million in funding from investors like Tencent, Nexus Venture Partners and Omidyar Network.