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KaarTech posts Rs 359 Cr revenue in FY23; remains profitable

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Digital transformation consulting firm KaarTech raised $30 million in July 2023 and the sizable funding helped the company to hack 56% growth in its topline in FY23. However its profit remained stagnant in the same period due to a sharp rise in its employee benefit costs. While the external capital helped the firm to register 56% growth in its topline in FY23, its profit remained stagnant in the same period. Kaar Technologies’s revenue from operations spiked to Rs 359 crore in FY23 from Rs 230 crore in FY22, its consolidated financial statements filed with the Registrar of Companies show. Founded in 2006 by Maran Nagarajan, Ratnakumar N, Selvakumaran M, and George Guardian, the company specializes in SAP and S/4 HANA implementation and offers consultation, implementation, and support of SAP-based enterprise software solutions to enterprises. Income from IT services comprising software development services, support services, and maintenance were the primary sources of revenue for KaarTech. The firm’s 97% of the revenue came from exports mainly from Saudi Arabia, Qatar, Oman, UAE, and other overseas markets. Similar to other product & service oriented tech companies, its employee benefits accounted for 71% of the overall expenditure. This cost surged by 81.3% to Rs 243 crore in FY23 from Rs 134 crore in FY22. The firm’s legal professional, rent, website maintenance and development, marketing and other overheads catalyzed its overall expenditure by 65% to Rs 340 crore in FY23 from Rs 206 crore in FY22. See TheKredible for the detailed expense breakup. The 80% surge in employee benefits impacted its profit which remained constant at Rs 22 crore in FY23. Its ROCE and EBITDA margin stood at 28% and 11.5%, respectively. On a unit level, Karr Technology spent Rs 0.95 to earn a rupee of operating income in FY23. KaarTechnology has raised $35 million across rounds including its $30 million led by A91 partners in July last year. According to the startup data intelligence platform TheKredible, its co-founders Maran Nagarajan, Selva Kumaran, Chandrasekaran Venugopal, V. Chandrasekaran and Guardian George cumulatively command 78.25% of the company. FY22-FY23 FY22 FY23 EBITDA Margin 15% 11.5% Expense/₹ of Op Revenue ₹0.90 ₹0.95 ROCE 31% 28% KaarTechnology stands out for the obvious-its strength in West Asia, and the EU rather than the North America and EU combination that powers most IT firms. While the fund raise was meant to correct that imbalance with a stronger push into North America, it does leave the firm with a lot to aim for. It should also explain the sharp rise in employee costs and more, as it prepares for its US push. At its current size, it is probably still some way off from acquiring true scale that could take it all the way to a successful IPO, but chances are, the firm will get there soon.