Startups are cash burning machines !! This is what we have always heard, but did Nothing India actually make a profit in its first full year of operation itself? and that too a decent profit of INR 17 crores i.e. USD 2mn (1.4% profit margin). Don’t judge the book just by its cover, let’s just dig a bit deeper.

So recently, Essentially Nothing Private Limited (i.e. Nothing India) disclosed its FY23 (1st April 2022 to 31st March 2023) detailed financials with the Ministry of Corporate Affairs, India.

During this year, it reported total revenue of INR 1231 crores (USD 153mn), EBITDA of INR 22 crores (USD 3mn) and profit after tax of INR 17 crores (USD 2mn), but there is a catch !!!

Actually, out of the total revenue, about INR 233 crores (USD 29mn) i.e. ~19% came as Subvention Income from Nothing Technology.

As mentioned in the detailed financials, “During the current year, the management of Nothing Technology Limited has decided to support the Company a payment of INR 226.58 crores and INR 5.99 crores towards Financial Year 2022-23 and Financial Year 2021-22 respectively, in order to enable the Company in maintaining the target operating profitability level as agreed under the inter-company Trading agreement between the company and Nothing Technology Limited.”

So in short, Nothing Tech actually supported Nothing India with this payment. Point to be noted is that, actually, there is no cash inflow for Nothing India, thus this support is theoretically and practically quite different from equity investment or shareholder loan.

Surprising thing to be me is why such support was given, as on the face of it the support is actually increasing the tax incidence on Nothing India. Nevertheless, if we adjust this support from revenue as well as the profits, the company actually turns loss making (loss of INR 164 crores or USD 20 mn). This is 16.5% of adjusted revenue, thus looks like a large one but I believe that the figure is manageable for the first year of operating when the company is establishing itself. Even Carl has mentioned that the Phone(1) was sold at I think zero profit to loss.

Financials Snapshot (Essentially Nothing Private Limited)

Estimated product wise volumes:

Time to play some assumption game to estimate Nothing India volumes. I have taken few assumptions and have mentioned the same. As Aswath Damodaran (valuation guru) always say “I would rather be transparently wrong than opaquely right”, so better take some transparent assumptions.
If I consider that

mobile phone reported revenue is for Phone (1) given Phone (2) launched post March 2023. Majority volumes from base version Phone (1)
mobile accessories reported revenue is for mainly ear (stick) and some for ear(1) given that by April 2022, ear(1) must have already sold its majority volumes. Also, 2-3 days of ear(2) sales must be there as sales started 28th March 2023. So, mainly ear (stick)
Average selling price from price history of flipkart for Phone (1) and ear (stick)
Discount / rebate as reported by company i.e. 9% of product revenue
India GST tax at 18%. Revenue to be post deduction of this tax

So, looks like in India, Nothing has sold about 400,000 Phone (1) and 80k+ ear (stick) in the year ended March 2023. These are quite massive numbers considering I think once Carl mentioned that Phone (1) globally has sold some 600,000 units (in Dec 2022 to CNBC). Ear (stick) numbers are also decent given the price and high ear(1) sales. Great going.

ASP source:

· https://pricehistoryapp.com/product/nothing-ear-stick-bluetooth-headset

· https://pricehistoryapp.com/product/nothing-phone-1-black-128-gb

Some other observations:

Limited spend on sales and marketing: Only INR 9 crores (USD 1mn) i.e. 0.9% of revenue was spent on sales, marketing and advertising which looks low given the stage of the brand building. This is inline with limited advertisements seen in India. P.S.: Expenditure at Nothing Global level is not considered, which also has rip off benefit on Indian operations also.
Warranty & rebate provision: Company has created a provision of INR 58 crores (USD 7mn) for warranty and rebate which is 5.8% of revenue. Looks a decent number for warranty claims. One odd thing is that I could not find the provision creation in P&L account, thus looks like not expensing it again increases tax incidence. Quite possible that it is part of discount and rebates which are deducted from revenues.
Zero exports for now: So, looks like India manufactured devices right now are consumed in India only. Lets hope exports will start in future, given now Apple is making latest iphones in India.

Overall, good set of numbers for the first full year. The base is set now for the takeoff. Hoping to see even stronger revenue this year.

Thanks for spending time on reading this long one. Please note, the above analysis is my personal one and is based on many assumptions, thus it may or may not match with business underlying performance.

Excel attached

nothing-india-fy23-financials.xlsx

22kB