On borrowed time: Is ShareChat past the point of no return?

To say ShareChat’s latest annual filings were a bloodbath is to put things mildly. Released last week, they paint a picture of a once-soaring company not just caught in a tailspin, but one that is dangerously close to getting intimately acquainted with terra firma.

The headline numbers left little to the imagination. In the year ended March 2023, Bengaluru-headquartered ShareChat posted nearly Rs 5,863 crore in annual losses. And while its revenue grew almost 60% to Rs 552 crore, this barely covers a fraction of its operating cash burn of Rs 3,045 crore.

In comparison, its biggest competitor VerSe Innovation, which operates news aggregator Dailyhunt and short video app Josh, managed to grow its operating revenue to Rs 1,457 crore for the same period. And while Verse remains loss-making—clocking a loss of Rs 1,900 crore—this represents a 34% improvement for the company, compared to the previous fiscal. By contrast, ShareChat’s losses ballooned by 72%

The dismal results cap off what has been an annus horribilis for ShareChat, which is backed by blue chip investors such as Tiger Global and Elevation Capital, social media giants X (formerly Twitter) and Snapchat, and tech giants Google and Xiaomi. With the startup burning through its funding at a rate of knots, it has been forced to let go of more than 1,000 employees across multiple rounds of layoffs. It also shuttered its fantasy sports vertical in December 2022 and its live e-commerce business shortly after.

Even as the company was cutting costs, it saw two of its three co-founders—Farid Ahsan and Bhanu Pratap Singh—exit the company in January. While Ahsan was the company’s chief operating officer, Singh served as chief technology officer.

According to back-of-the-envelope calculations based on ShareChat’s filings, the company ended fiscal 2023 with less than six months of runway. This was likely extended by a few months thanks to the various cost-cutting measures it has implemented. But with investors loath to back high-burn startups that don’t have a clear path to profitability, ShareChat faces an unclear future. The fact that it is also burdened under a mountain of debt—its financial liabilities stood at Rs 5,274 crore as of March 2023—only makes its plight more precarious.

The CapTable has learnt that ShareChat is currently in the market to raise a bridge round from existing investors as it looks to buy itself more time to stage a turnaround. The company may even opt to raise these funds via convertible notes—a form of short-term debt—to avoid taking a valuation haircut. ShareChat, which was valued at $5 billion at the time of its last fundraise in mid-2022, declined to comment on this.