Social Commerce Startup CityMall Reports Strong Growth Despite Operating Losses

CityMall, a social commerce platform targeting tier II and III cities in India, recently reported significant revenue growth following a successful $75 million Series C funding round led by Norwest Ventures.

The company’s financial statements filed with the Registrar of Companies reveal a 140% increase in gross revenue for the fiscal year ending March 2023 (FY23), reaching Rs 352 crore compared to Rs 144 crore in FY22.

Capitalizing on Community Networks

CityMall focuses on selling lifestyle products, groceries, and other essential items through a network of approximately 20,000 community resellers operating across eight smaller cities in Haryana. They claim to have a customer base of 200,000 consumers in these regions.

Revenue Breakdown

The sale of merchandise represents the primary source of income for CityMall, accounting for 94.8% of their total operating revenue in FY23. This segment witnessed a substantial 2.43x growth, reaching Rs 334 crore. Other revenue streams include logistics, marketing contracts, brand partnerships, and the sale of scrap items.

Cost Analysis

CityMall’s largest expense category is the procurement of goods, which accounts for approximately 62% of their total expenditure. As expected with their growth trajectory, this cost saw a corresponding increase of 2.4x to Rs 326 crore in FY23. Employee benefits also rose by 56.4% during the same period.

Operating expenses grew at a rate of 88.53%, reaching Rs 526 crore in FY23 compared to Rs 279 crore in FY22. This increase can be attributed to factors such as rent, advertising and promotions, transportation, cloud hosting, and contractual labor.

Financial Performance and Future Outlook

Despite the rise in expenses, CityMall managed to maintain a relatively stable loss figure. Their losses in FY23 grew by only 10% to Rs 145 crore compared to Rs 131 crore in the previous year. It’s important to note that their Return on Capital Employed (ROCE) and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin remain negative at -25% and -35.7%, respectively. On a unit level, this translates to spending Rs 1.49 for every rupee earned.

CityMall has successfully raised over $110 million across multiple funding rounds and was valued at around $300 million in their latest equity financing. Public data suggests that Elevation Capital holds the largest external stake (18.58%), followed by Accel Partners and Jungle Ventures. The company’s co-founders retain a combined ownership of 19.23%.

While CityMall demonstrates strong revenue growth, their ability to achieve profitability in the near future remains to be seen. Their focus on customer acquisition and network expansion may require continued investment, potentially impacting their short-term financial performance.