IncNut Digital, a Hyderabad-based startup focusing on personalized beauty care and ecommerce, witnessed considerable growth in revenue in FY22. Despite crossing the milestone of Rs 200 crore, the company faced a significant increase in losses, highlighting the challenges it encountered along the way.
Operating as a media and e-commerce platform, IncNut Digital comprises five distinct brands. Among them, Stylecraze, Mom Junction, and The Bridal Box are media platforms that offer valuable content and insights to their audiences. On the other hand, Skincraft and Vedix specialize in ecommerce, providing a wide range of skincare and haircare products.
According to the consolidated financial statements filed with the Registrar of Companies, the sale of products from Skincraft and Vedix contributed the majority (approximately 99.85%) of IncNut’s revenue. In FY22, revenue surged by 38.1% to reach Rs 204.1 crore, compared to Rs 147.8 crore in FY21.
On the cost side, advertising and promotion accounted for the largest share of overall expenditure, representing 45% of the total. This cost escalated by 78% to Rs 112.4 crore in FY22. Notably, IncNut Digital’s advertising expenses increased over five times in the previous two fiscal years.
The cost of product procurement grew by 29.8% to Rs 63.16 crore in FY22. Additionally, employee benefits and freight costs rose by 22.8% and 27.5%, reaching Rs 25.4 crore and Rs 19.5 crore, respectively. Overall, the total cost surged by 48.9% to Rs 249.3 crore in FY22.
Despite the growth in revenue, IncNut Digital faced a significant spike in losses. In FY22, losses soared by 3.34 times, amounting to Rs 44.5 crore, compared to Rs 13.3 crore in FY21. The net cash outflows from operations also experienced a substantial increase, rising 7.6 times to Rs 45.1 crore in FY22.
On the ratio side, IncNut Digital’s ROCE (Return on Capital Employed) stood at -1115%, indicating a negative performance. The EBITDA margin, a measure of operating profitability, registered at -20.75% in FY22. Furthermore, the company spent Rs 1.22 to earn a unit of operating revenue.
IncNut Digital shares a common challenge with many direct-to-consumer (D2C) ecommerce platforms – the inability to drive sales without heavily relying on advertising. The company’s advertising expenses are not only excessively high but also fail to generate the desired results in terms of building a sustainable brand. These challenges also shed light on the content-led D2C approach, which has yet to deliver a viable growth proposition in India.
In conclusion, IncNut Digital achieved an impressive milestone of Rs 200 crore in revenue during FY22. However, the company faced a substantial increase in losses, primarily driven by high advertising costs. The challenges it encountered highlight the need for D2C ecommerce platforms to explore alternative strategies for sustainable growth and brand building in the Indian market.