Varanium Cloud Ltd’s Q4 Results

INR Crores	31-Mar-22	31-Dec-22	31-Mar-23
Revenue	13.32	109.49	150.33
EBITDA	-7.01	39.61	44.33
EBITDA%	-52.6%	36.2%	29.5%
EPS	-3.12	7.36	7.34
PAT	-7.91	29.58	29.49
PAT %	-59.4%	27%	19.6%

• Varanium’s revenue stood at Rs 150.33 Cr in Q4FY23, witnessing a strong growth of 37.3% QoQ and 10.3x growth YoY. The growth is coming in from significant expansion in the VoIP business and a strong momentum in EaaS revenues. The newly launched EdTech vertical (Edmission) and Hydra Web services (BPO) is also adding to the top-line. Export revenues form 85.8% of the business while the domestic revenues contribute to the remaining 14.2%. Moving forward, the proportion of export revenues is expected to come down as other service lines start to gain momentum.
• The expansion in the revenues is accompanied by significant costs increases; related to expansion in data center, bandwidth and hosting charges, seeing a 55% increase QoQ and a massive 9.7x jump YoY. Q4 EBITDA stood at Rs 44.33 Cr representing 11.9% increase QoQ. EBITDA Margins, on the other hand witnessed a de-growth, falling to 29.5% in Q4 compared to 36.2% in Q3. Profit Margins have also declined considerably, standing at 19.6% in Q4.

• Commissions from the PayFac business witnessed a significant drop of 63.7%, contributing Rs 2.3 Cr to the total revenues. The management has decided to completely phase out this vertical by Q2 FY24, as it is getting complex and heavily regulated by the day.
• SaaS revenues coming from the VoIP vertical is the core business, accounting for 85.8% of the total revenues at Rs 128.9 Cr. This segment demonstrated an exceptional growth at 40.8% QoQ, coupled with significant costs associated with the expansion of hosting capacity, bringing down the overall gross margins to 31.2% in Q4, compared to 39.2% in Q3.
• E-Commerce as a service (EaaS) accounts for 10.2% of the total revenues at Rs. 15.3 Cr, and is expected to contribute 20% to the total mix in FY24. Edmission, its ed-tech wing currently accounts for 2.3% of the total business; followed by the newly launched Hydra Web Services (BPO) that has grown from 5 seats to 60 seats in the quarter and currently contributing only 0.2% to the overall revenues. Edmission and Hydra Web Services combined is expected to grow significantly to contribute 15% to the total revenues in FY24.

• Varanium is expected to launch an OTT streaming platform services called Cable Cloud in Q1FY24. In addition to that, the company has also announced the acquisition of Fastway – a Digital Cable TV and Broadband Services provider in North India for Rs. 2683 Cr. This is to be financed partly by a preference issue and vendor debt.
• The company believes that the run rate for the last quarter is expected to continue moving forward, with profit margins stabilizing between 22-25% in FY24.

The Company’s performance some may argue has been too good to be true.