Tata 1mg Shifts Focus to Profitability in FY24, Reduces Losses by 75%

After two years of rapid growth, Tata 1mg, a leading e-pharmacy platform, adopted a more cautious approach in fiscal year 2024 (FY24). While revenue continued to rise, the company prioritized profitability, resulting in a significant reduction in losses.

Revenue Maintains Upward Trajectory

Tata 1mg’s financial statements, accessed through the Registrar of Companies (RoC), reveal a 21% increase in operating revenue for FY24, reaching Rs 1,968 crore compared to Rs 1,627 crore in FY23. The sale of medicines remained the primary revenue driver, accounting for 81.3% of the total and growing by 24% to Rs 1,599 crore in FY24. Lab tests, patient support programs, advertising, and shipping fees also contributed to the company’s income stream.

Focus on Cost Management

Operating with a physical inventory, Tata 1mg saw the cost of procuring medicines, its biggest expense, rise by only 8.5% to Rs 1,289 crore in FY24. Additionally, the company implemented stricter cost controls across various operational areas such as employee benefits, information technology, legal fees, advertising, commissions, packaging, and fulfillment. These measures resulted in a 20.4% increase in total expenditure, reaching Rs 2,303 crore in FY24.

Significant Reduction in Losses

The combination of a healthy revenue stream and controlled costs led to a dramatic 75% decrease in losses for Tata 1mg in FY24. The company’s net loss dropped from Rs 1,255 crore in FY23 to Rs 313 crore in FY24. However, the company still operates at a negative EBITDA margin of -10.85%. This translates to Tata 1mg spending Rs 1.17 to earn each rupee of revenue in FY24.

Reasons for Shifting Focus

The substantial losses reported in FY23 can be partly attributed to a non-cash expense of Rs 668 crore related to Fair Value Through Profit or Loss (FVTPL). Additionally, Tata 1mg’s cost-control measures likely stem from a shift in strategy. As part of the Tata Group, financial performance plays a crucial role in gaining operational freedom. Furthermore, with diminishing customer loyalty in the e-commerce space, aggressive customer acquisition tactics like deep discounts are becoming less effective. Instead, Tata 1mg is likely prioritizing targeted marketing campaigns based on data-driven insights.

Future Prospects under the Tata Umbrella

While the current focus on profitability is understandable, Tata 1mg’s future outlook may differ due to its affiliation with the Tata Group. The large conglomerate’s extensive resources, including the recently launched Tata Neu platform, could potentially provide more leeway for future growth strategies.