Wow! Momo Enjoys Explosive Growth Despite Minor Increase in Losses

Wow! Momo, a leading quick-service restaurant chain specializing in momos, has witnessed remarkable growth over the past two fiscal years. The company’s revenue skyrocketed by 3.8 times, reaching Rs 413 crore in FY23 compared to Rs 106 crore in FY21. However, despite this impressive expansion, Wow! Momo experienced a slight increase in losses during FY23.

Operational Revenue Soars, Brand Portfolio Expands

Financial statements filed with the Registrar of Companies reveal a significant surge in operational revenue for Wow! Momo. From FY22 to FY23, operational revenue jumped 87.7%, reaching Rs 413 crore from Rs 220 crore. Founded in 2008 by Sagar Daryani and Binod Homagai, the company operates three distinct QSR brands: Wow! Momo, Wow! China, and Wow! Chicken. Currently, Wow! Momo boasts a network of 630 outlets across 35 Indian cities, directly employing over 6,000 individuals.

Revenue Breakdown and Expenditure Analysis

The sale of food items remains the sole source of revenue for Wow! Momo, a company backed by investment giant Tiger Global. Additionally, the company generated Rs 3 crore in interest income from deposits and current investments, bringing its total income for the fiscal year ending March 2023 to Rs 416 crore.

For Wow! Momo, the cost of procuring ingredients forms a significant portion of its overall expenditure, accounting for 34%. This cost witnessed a substantial increase of 66.7% in FY23, reaching Rs 160 crore. Rent payments also contribute significantly to operational expenses, with Wow! Momo shelling out Rs 62 crore in FY23.

Employee benefits, electricity, advertising and promotions, commissions, and other overheads further contribute to the company’s expenditure. Consequently, Wow! Momo’s overall expenditure climbed to Rs 471 crore in FY23, compared to Rs 275 crore in FY22. A detailed breakdown of expenses can be found on TheKredible, a startup data intelligence platform.

Maintaining Profitability Despite Growth

Despite the surge in expenditure, Wow! Momo managed to keep its losses relatively stable. Losses increased by only 13.1% in FY23, reaching Rs 60.5 crore compared to Rs 53.5 crore in FY22. Furthermore, the company’s ROCE (Return on Capital Employed) and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margins improved to -11% and -1.8%, respectively. Notably, in FY23, the company spent Rs 1.14 to earn every rupee of revenue.

Investment, Financial Strength, and Future Goals

To date, Wow! Momo has successfully secured over $120 million in funding, including a recent $51 million Series D round led by Khazanah. According to TheKredible, Tiger Global remains the largest external stakeholder, followed by LightHouse. As of March 2023, the company held current assets of Rs 131 crore, with cash and bank balances amounting to Rs 54 crore. Estimates from TheKredible suggest an enterprise value to revenue multiple of 6.8X for Wow! Momo.

With its established brand recognition and impressive growth trajectory, Wow! Momo aims to achieve a topline (revenue) of Rs 650-700 crore in the recently concluded fiscal year (FY24). Considering the company’s widespread distribution network and growing customer base, this target seems achievable.

Adaptability and Market Landscape

Wow! Momo deserves recognition for its perseverance during challenging times post-2020. The company successfully established itself as a standalone product-based QSR chain, despite limited menu options initially. While the menu has since expanded, Wow! Momo remains agile enough to adapt to market demands.

Although the competition in the momos segment is relatively low, the mid-range market space where Wow! Momo operates presents some challenges. However, the growing popularity of momos across various regions in India offers significant potential for further expansion. With its robust network and adaptable approach, Wow! Momo appears well-positioned to meet the ambitious goals of its stakeholders.