Mokobara, the Bengaluru-based direct-to-consumer luggage brand, had an impressive fiscal year in FY24, recording a significant revenue jump and cutting its losses nearly in half. However, despite the growth, the company still faced challenges in achieving profitability.
Strong Revenue Growth Amid Rising Costs
Mokobara, which specializes in travel accessories like wallets, bags, and kits, reported a remarkable 2.2X growth in its operating scale for the fiscal year ending March 2024. The company’s revenue surged to Rs 117.4 crore, a substantial increase from Rs 53.3 crore in FY23. This impressive growth reflects a strong demand for its products, which have increasingly found favor among discerning travelers looking for high-quality, direct-to-consumer offerings.
Despite this, Mokobara’s total income for FY24 stood at Rs 119.03 crore, boosted by an additional Rs 1.6 crore in interest income. While the numbers indicate impressive traction, it’s important to note that the surge in revenue was not without its challenges.
The primary factor impacting Mokobara’s financials was a steep rise in expenses. Material costs, which account for the bulk of the company’s expenses, more than doubled to Rs 57.28 crore, comprising nearly 47% of total costs. Marketing spend also climbed, up 37.9% to Rs 22.64 crore, as the company worked to expand its brand presence. Employee benefits were another area of increased expenditure, surging by 2.6 times to Rs 13.02 crore.
Key Expense Areas
- Material Costs: Rs 57.28 crore (46.5% of total expenses)
- Advertising Expenses: Rs 22.64 crore (37.9% increase)
- Employee Benefits: Rs 13.02 crore (2.6X increase)
These growing expenses pushed Mokobara’s overall costs to Rs 123.3 crore, nearly double its FY23 expenses of Rs 61.9 crore. As a result, the company was left with a loss of Rs 4.24 crore, a slight improvement from the Rs 8.21 crore loss in FY23.
A Balancing Act: Revenue vs. Costs
Mokobara’s ability to scale up rapidly while keeping losses in check highlights a balancing act between growth and profitability. In FY24, the company’s return on capital employed (ROCE) and EBITDA margin stood at -0.97% and -0.92%, respectively. This signifies that, despite the revenue boost, the company is still struggling to generate profit from its operations. On a unit basis, Mokobara spent Rs 1.05 to earn each rupee in operating revenue, showing the challenges the company faces in cost management.
Nevertheless, the reduced losses indicate that Mokobara is on the right track. The company has made considerable strides in the highly competitive luggage and travel accessory market, where margins are typically tight. The key to Mokobara’s future growth lies in managing these expenses as it scales, while finding ways to increase its revenue per customer and expand into new markets.
Strong Cash Position Despite Losses
A positive takeaway from Mokobara’s FY24 financials is its strong cash position. The company’s current assets grew to Rs 182.6 crore, primarily driven by a surge in cash and bank balances, which reached Rs 111.67 crore. This increase in liquidity is largely due to the $12 million raised by the company, led by Peak XV. This financial backing provides Mokobara with the runway it needs to expand further and strengthen its position in the market.
Mokobara’s Funding Journey
- Total Raised in FY24: $12 million
- Lead Investor: Peak XV
- Cash and Bank Balances: Rs 111.67 crore
Market Landscape: Competition Heats Up
Mokobara operates in a highly competitive direct-to-consumer market, where it competes with brands like Uppercase, Assembly, Nasher Miles, and EUME. These companies are also raising funds to bolster their own positions in the luggage and travel accessory space.
Uppercase raised $9 million in August, Assembly secured $2 million, Nasher Miles raised $4 million in a bridge round, and EUME received seed funding. Mokobara’s competitors are also targeting a similar customer base and offering comparable products, creating a competitive landscape where differentiation is key.
Despite this, Mokobara has carved out a niche for itself, offering products that appeal to a more discerning set of customers. This focus on high-quality, direct-to-consumer products has allowed the company to grow rapidly, though the market remains volatile, with significant competition from both established players and new entrants.
The Road Ahead: A Steady Path to Profitability
Mokobara’s story is one of rapid growth, challenges, and potential. While the company has made impressive strides in terms of revenue and scaling, it still has work to do in terms of profitability. The luggage industry has seen significant shifts in recent years, with newer entrants like Mokobara competing head-to-head with legacy brands such as VIP Industries and Samsonite.
The company’s focus on direct-to-consumer sales, combined with strategic investments and a clear path forward in managing costs, gives it a solid foundation to weather the competitive storm. Whether Mokobara can turn its losses into profits in the coming years remains to be seen, but investors clearly see promise in its business model.
Comments