InMobi: Is India’s first unicorn really profitable?
From L to R: InMobi co-founders Amit Gupta, Naveen Tewari, Mohit Saxena and Abhay Singhal

Mobile ad-tech firm InMobi was the first Indian startup to be valued at $1 billion and was once pegged to challenge the might of search and advertising giant Google.

But as things stand, the unicorn appears to have fallen short of its own expectations - at least in terms of financial performance.

A decade since coming into being, InMobi is yet to record a net profit for a full financial year at the group level (public data is only available for the past four financial years).

In fact, InMobi Pte. Ltd - the holding company registered in Singapore - recorded a $12.7 million loss in the financial year ending March 31, 2017.

A silver lining is that at the group level, the firm managed to narrow its losses from $53 million the previous fiscal, as per the firm's consolidated financials available with Singapore's Accounting and Corporate Regulatory Authority (ACRA).

According to FactorDaily, the company reported losses of $40 million for the financial year ended March 2015, the report added. Its losses stood at $44.6 million in FY14.

To be fair, those losses are significantly lower than that of other unicorns around the same age.

Take Flipkart Pvt Ltd for instance, The Singapore-based holding company of the Indian e-commerce major reported a net loss of Rs 5,768.8 crore for the financial year 2015-16. This was an increase of 86% from a year earlier, tech news website FactorDaily reported in December 2016, citing the company’s annual report filed with Singapore's authorities.

Numbers game

InMobi primarily earns from targeted advertisements on mobile apps of partner publishers. The cash register rings each time an end-consumer clicks an ad or downloads the subsequent offering.

In 2011, InMobi's chief executive officer Naveen Tewari told news magazine Business Today that the firm would achieve billion-dollar revenues within three years. Six years since that interview, InMobi remains well short of that target.

InMobi Pte Ltd's revenue marginally dropped to $280 million in FY17 from the $283 million it reported in the previous fiscal. In FY15, its revenues stood at $262 million and it collected $202.5 million the year before that, according to ACRA, Singapore, as per a FactorDaily blog on from February 2016.

As for profitablity, the picture is slightly rosier for its Indian subsidiary. InMobi Technology Services Pvt Ltd, whose revenue is significantly lower, recorded a net profit in the financial year 2016-17, according to filings with India's Registrar of Companies (RoC).

The Indian arm reported a net profit of Rs 11.9 crore in FY17 as against a loss Rs 5.3 crore the previous financial year.

However, it also reported a dip in revenue at Rs 287 crore for FY17 as against Rs 300 crore in FY 16.

A reduction in publishing costs and salary expenses (21%) were the main reasons why InMobi Pte Ltd managed to narrow its losses in FY17. The cash and cash equivalents of the company increased to $62 million in FY17, up from $47 million during the same period of the previous fiscal.

However, CEO Naveen Tewari's salary slipped nearly a third from Rs 2.9 crore in FY16 to Rs 2 crore in FY17, according to the company's India financials.

But InMobi has a slightly different perspective on its financial performance.

“InMobi achieves profitability,” declared a media statement from the company on April 5 last year. InMobi said it was "EBITDA (earnings before interest, taxes, depreciation and amortisation) profitable for the year ending December 2016, and expects to continue being profitable in 2017. The company was also net profitable for Q4 2016. As a result of profitability, the company was able to generate cash every quarter from Q2 2016 till now.”

To be clear, InMobi was referring to the 2016 calendar year. However, it did not reveal its EBITDA numbers or quarterly net profit figures.

The latest numbers appear to suggest that InMobi was unable to maintain its claimed profitability subsequently.

Following a detailed questionnaire sent by VCCircle, an InMobi spokesperson said the company will officially respond in due course. We will publish an update if and when these responses are received.

Speaking on the condition of anonymity, a former top executive at the firm sought to put things in perspective.

"The financial year 2016-17 was a year of consolidation at InMobi. That is when a lot of exits happened. Despite that, it had its focus right," the former executive said.

Those exits refer to to an outflow of talent over the past couple of years. Two co-founders also left the company, with Amit Gupta stepping down last November to start his own venture.

Co-founder Mohit Saxena, who was chief technology officer at InMobi, had resigned in June.

And in October, VCCircle reported that the company had lost its chief marketing officer Arun Pattabhiraman.

"FY18 financials, when they file it, will give you a better picture. They had on-field sales teams in almost all geographies. Now, they have consolidated some of these teams," added the former executive mentioned above.

What lies ahead

InMobi was Japanese investment behemoth SoftBank's first Indian investment, receiving funding of $200 million - a large sum even by today's standards - in 2011.

There were reports of Softbank writing down its investments in InMobi. But it is unclear why SoftBank would do this given InMobi grew at a decent pace at least until FY16. Going ahead, the company's biggest challenge appears to be the lack of confidence in the company from existing investors.

The last time InMobi raised money was in late 2015 - $100 million in a debt financing round from a consortium of lenders led by US-based Tennenbaum Capital Partners.

Will it be able to attract more investment? Some are not so sure.

"Alibaba, Tencent or Baidu don't need InMobi's technology nor do they get to enter a new market by investing in InMobi," said Satish Meena, senior analyst at market research firm Forrester. "At $1 billion valuation, it is tough to get people to fund or buy you."

Anup Jain, managing partner at consumer and retail research firm Redback Advisory Services, foresees a similar problem.

"The ad-tech industry is dominated by Google and Facebook. It is about playing the large bets, and for that you need cash. A company like InMobi has to innovate for clients which are not being done by the larger players," he said.

Founded as mKhoj by Naveen Tewari, Amit K Gupta, Abhay Singhal and Mohit Saxena, inMobi has twice tried to reinvent itself.

It started out as a mobile search platform before renaming itself and entering the advertising space. In 2015 came another avatar with the launch of Miip, a discovery-led mobile commerce platform which proved to be a failure. The company witnessed an exodus of talent amid a choppy mobile ad market that year and the following year as well.

Profitability may be around the corner now, but InMobi Pte Ltd is hardly out of the doldrums. Its borrowings amounted to nearly $78 million in FY17, up from $71 million the previous year.

As FY18 draws to a close, InMobi still has a chance of becoming India's second unicorn to turn in a net profit after big data firm MuSigma. But the bottom line is that it isn't profitable yet.

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