When Digital India was born, we had no idea that in an extraordinary situation like a complete lockdown, the apps and services that had helped us get through the day would be shut down for millions of people.
The coronavirus pandemic has wreaked havoc on ride-hailing companies all over the world. Uber and Ola, for example, are yet to reach their pre-covid peaks in India. According to regulatory filings, Uber India’s annual profit increased by 2873 per cent to Rs 720.74 crore in FY20 from Rs 24.2 crore in FY19.
The Reason Behind The Ride-Hailing Company Uber India’s Annual Profits
Uber’s revenue comes largely from the use of its website and related services by drivers and restaurants, serving as a middleman for ride-hailing and online food ordering transactions.
The company offers services such as on-demand lead generation, payment facilitation from end-users to drivers, and restaurant fulfilment for its platform users’ on-demand requests.
The selling of Uber Eats to Zomato and the booking of Deferred Tax Charge, or DTC, accounted for the majority of the profit on books, which increased the annual profit.
In February of last year, Uber sold its food delivery business to Zomato for a record Rs 1,493.5 crore ($206 million), in exchange for shares in Zomato Private Limited.
Uber India made a profit of Rs 703.4 crore on its discontinued operations for the fiscal year ending in March 2020 (97.6 per cent of annual profit in FY20). The company booked a DTC of Rs 593.93 crore for the same time.
It resulted in a profit of Rs 17.34 crore from its ongoing operations when adjusted with loss before tax changes of Rs 567.8 crore with DTC.
Business Operations During FY20
Uber India’s revenue from ride-hailing and food delivery services fell to Rs 719.06 crore in FY20, down from Rs 892 crore the previous year.
Although operating sales have decreased significantly, the company’s annual expenditures have increased significantly. From Rs 856.5 crore in FY19 to Rs 1,342.6 crore in FY20, the company’s total expenditure increased by 55.8% to Rs 1,342.6 crore.
Employee benefit expenses made up almost a quarter of 24% of the total expenses incurred during FY20. These costs grew by 13% to Rs 320.5 crore in FY20 from Rs 283.7 crore in FY19. Security-related expenses also grew by 23.6 % to Rs 17.05 crore during the same period.
Employee compensation costs accounted for about a quarter of overall expenditures in FY20, or 24 per cent. From Rs 283.7 crore in FY19 to Rs 320.5 crore in FY20, these costs increased by 13% to Rs 320.5 crore. Over the same time, security-related expenses increased by 23.6 per cent to Rs 17.05 crore.
Advertising and marketing were also significant cost drivers for the business, accounting for 17% of annual expenses. From Rs 168.3 crore in FY19 to Rs 229.6 crore in FY20, these costs increased by 36.4 per cent. During FY20, Uber India spent Rs 29.72 crore on rent and maintenance, as well as Rs 31.4 crore on utility payments.
Unusual line items on the expense sheet included Rs 361.2 crore in “Cost of Materials Consumed” and Rs 213.8 crore in “Unexplained Miscellaneous Expenditure.” Uber India invested Rs 1.87 to raise a single rupee of operating revenue in FY20, compared to Rs 0.96 in FY19. The company’s EBITDA margins have shrunk from 11.71 per cent in FY19 to -67.5 per cent in FY20.
When looking at the company’s financial results in FY20, one can see that the operating margin has been depleted, owing to a rise in operating costs and the restructuring of its business activities. Uber India seems to be in a stronger position to focus on its main business of ride-hailing now.
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