ClearTax betting big on crypto tax offerings, expects profitability in next 12 months

Archit Gupta, Founder and CEO of Clear (Parent firm of ClearTax)

Tax management platform ClearTax is witnessing strong growth in demand for its cryptocurrency tax management offerings both from the Business-to-Business (B2B) and Business-to-Consumer (B2C) side even as the segment has taken a backseat in the past few months due to the global market crash and regulatory scrutiny.

“The number of consumers trading in crypto hit an all-time high pre-Budget and the enthusiasm did taper off a little bit, but users are coming back. Crypto continues to be an area where people remain interested and that data is getting reported through our technology to the government,” said Archit Gupta, Founder and CEO of Clear (Parent firm of ClearTax), in interaction with Moneycontrol.

In the Budget memorandum, the government has detailed that the 30 percent flat tax rate will be applicable starting April 1, 2023, and the taxes will be levied from the assessment year FY24. The one percent tax deducted at source (TDS) has been levied in a bid to track crypto transactions in the country.

In India, cryptocurrency has included under the umbrella term ‘Virtual Digital Asset’ (VDA), which also includes non-fungible tokens (NFTs).

Last year, Clear decided to offer solutions for customers to manage their crypto portfolio and taxes after the government announced a hefty 30 percent tax rate and a 1 percent TDS for gains and transfers of VDAs.

“This is the first time consumers are going to report VDAs in India. We know that some of those users or many of those users will want to solve for taxes. So they will come to us. So I think we remain quite focused on this area,” he added.

Profitability and IPO

While Clear reported a loss of Rs 222 crore in FY21, Gupta said that the firm will turn profitable in the next 12 months with a revenue growth of 80 percent year–on-year (YoY). Currently, the firm’s B2B SaaS vertical draws 80 percent of the revenues and consumer taxes 20 percent.

“We have started monetising certain assets. So I think you can expect consistent 80 percent revenue growth from us. We can expect profitability in about 12 months from Clear,” Gupta said.

“We expect a consistent growth and breakeven in 12 months with continuous cash flow and profits and potentially an initial public offering (IPO). So I think like, we are on the right track,” he said.

Gupta did not mention any timelines for an IPO. "We are still in that very aggressive build phase. Public markets, we would like to guide when we are ready. And we have like a very clear path,” he said.

Clear’s Monetisation Plan 

In 2022, Clear decided to monetise its free income tax calculation and filing offerings for consumers, and demand continues to be strong, said Gupta.

“We actually we beat our revenue forecast. Quite a bit. The number of users which came back and used the platform was more than the core team expected. I think the numbers have been much higher than projected and we are continuously seeing demand be there,” Gupta said.

Millennials and GenZ are preferring Clear over any other way of filing taxes, Gupta added. “For Millennials of GenZ going to an auditor or filing through the government portal is always more cumbersome, because the amount of data you have to generate is big. Many prefer using Clear,” he added.

More Acquisition on the cards

Clear so far has acquired companies such as CimplyFive, Xpedize, YBanQ and Kavy to expand and improvise its offerings. “We still have appetite for more acquisitions. We look at acquisition as capabilities to build on our roadmap. The second one is capabilities in newer markets, like international markets,” he added.

Clear ventured into the Middle East last year and is looking to enter other international markets. “Right now we are expanding in the Middle East. We will also expand into the European Union. And we continue to explore North America also. So essentially, we continue to explore markets which are good for SaaS,” Gupta said.

Clear’s focus areas and outlook for FY24

In October of 2021, ClearTax raised $75 million (around Rs 562 crore) in Series C funding round led by Kora Capital, the company said on April 16. Global fintech Stripe, Alua Capital, Think Investments and existing investors also participated in the round.

“We are well capitalised. We are generating more cash every day. So we are like, we have very strong unit economics CAC (customer acquisition cost) to LTV (Lifetime Value) payback periods. So for us like right now, there is no reason to fundraise. We are focused on our business,” Gupta said.

The firm will be investing more in its SaaS offering, Clear Finance Cloud. Clear Finance Cloud is a CFO office offering that is a unified platform that weaves interconnected processes between accounts payable, accounts receivable, tax, and treasury through a common information flow, breaking the data and process silos.

The firm is also exploring integrating artificial intelligence (AI) such as GPT4 into its platform. “Embedding AI and embedding finance into our offerings is something we will be doing a lot more now…so maybe at the right time, it'll make sense to integrate GPT capabilities into our products. So we will work on that,” he added.