ShareChat Parent Company Mohalla Tech Secures $49 Million in Debt Financing

Mohalla Tech, the company behind popular vernacular social media platform ShareChat and short video app Moj, has secured approximately $49 million in debt financing. This funding round involved existing investors in the company.

Debt Issuance Details Revealed in Regulatory Filings

A regulatory filing with the Registrar of Companies (RoC) details a board resolution passed by Mohalla Tech. The resolution authorizes the issuance of 4,895 Series I debentures, each with an issue price of $10,000, to raise a total of $49 million.

The debt financing round saw participation from existing investors in Mohalla Tech. These investors include Temasek, Lightspeed, HarbourVest, Moore Strategic Ventures, Rimco, and Alkeon. The news of this debt round was first reported by Inc42.

Debt Round Follows Down Round Fundraising Efforts

This debt financing comes amidst ongoing efforts by ShareChat to secure a larger equity round. Previously, the company reportedly aimed to raise $50 million in a down round that would value the company at $1.5 billion, a significant decrease from its $5 billion valuation during its previous fundraising in June 2022.

Funding Challenges and Monetization Issues

Data compiled by startup data intelligence platform TheKredible reveals that ShareChat has raised a total of $1.8 billion from various investors, including Twitter (now X), Alkeon Capital, Moore Strategic Ventures, and Tencent. However, the company has faced challenges in securing new funding and retaining existing investors. This could be attributed, in part, to difficulties in monetizing its user base, which consists largely of individuals with limited purchasing power.

Despite operating for nearly nine years, ShareChat reported spending nearly Rs 4,000 crore in FY23 while generating only Rs 533 crore in revenue. This translates to a unit-level expense of Rs 7.16 for every rupee of operating revenue earned in the last fiscal year. This high expense-to-revenue ratio positions ShareChat as one of the unicorns with the worst such ratio in FY23.

Losses Attributed to Acquisition Costs

The substantial increase in losses is primarily due to write-offs undertaken by the company following its acquisition of Moj competitor MxTakaTak. This acquisition, backed by Times Internet, reportedly cost Mohalla Tech a significant sum, estimated at $700 million in both cash and stock.

While ShareChat enjoys a near-monopoly in the social media space following the ban on Chinese apps like Bytedance-owned Helo, its short video platform Moj faces competition from players like Dailyhunt’s Josh, YouTube Shorts, and Instagram.