MUMBAI: Australia-based streaming service Guvera had raised $100mn, last year, as part of its expansion plans in India and other emerging markets like Philippines and Indonesia. The platform now plans to raise another $80 mn in an initial public offering (IPO) and the development has received several criticisms from its native media.
The multi-million float will raise the company’s valuation to $1.3 billion, and media reports suggest the investors have grown skeptical about Guvera’s expansion plans.
Why the criticism?
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The company had reported losses of $81 million last year and the figure has already reached $55.7 million for the first half of the year 2016. The criticism arrives concerning how little Guvera has grown revenue-wise since its launch in 2010 and the handling of the dodgy loans have worked against its case so far.
The platform re-launched in 2013 off the back of $60 million raise. “Horrifying”, “terrifying” and “shaky” and “disaster” were some of the terms that floated in media publications through some of the movers and shakers of the industry. Few even urged Australian Security Exchange (ASX) to disallow Guvera’s propositions citing it as the classic case of ambitious tech firms with minimum scope of growth.
The six-year-old organisation expects further negative operating cash flow and operating losses citing early years and increasing emphasis on investments in the ten countries Guvera offers its services.
Start-ups with little revenues have knocked on ASX’s doors for fundings and as the history suggests, more often than not, these ‘startups’ have failed to meet the expectations.
What does it mean for India?
The company recently secured licenses for Bollywood music, the first streaming service to do so, and claims to now have 16 million subscribers compared to Spotify’s 75 million users.
Guvera has been acquiring and retaining music rights and the venture into the regional pockets of the Indian market has further led to higher investments and lower outcome. Another form of expansion has occurred through branded channels concept that allows the brands to advertise on the platform and create several activities. For example, Harley-Davidson can make its own playlist and support it through the advertisements of its own product. The practice has extended to Indian market and the factor has, indeed, helped create Guvera an identity of its own in a market where other players have followed a generic format
of revenue generation.
Of the 16 million Guvera global users, the 7 million Indian users do provide a motivating and reasonable excuse to emphasise further on the emerging markets like India. Guvera achieved the figure of 7 million
Indian users four months after reporting 1.5 million users in January 2015.
The majority of the $80 million raised would be utilised to strengthen the presence in India and the focus on the emerging markets can provide Guvera an edge over its competitors like Spotify.
In Conclusion
The staggering amount of loans that puts Guvera in a vulnerable position has been one of the biggest reasons behind the doubts and concerns over the organisation seeking another IPO in its six short years of operational duties so far. Guvera had $4.4 million in loans outstanding to the parents of company director Steven Porch, and the proceeds through the IPO would be used to repay the amount.
The loans do not stop there. Creditors loans, unrelated parties’ loans and the money owed to ATO collectively amounts to over $22 million. The IPO would perform a major role in clearing the debts and loans for
Guvera. And that’s where the problem lies.
Critics and commentators have urged the investors to be wary of Guvera’s latest plans because a tiny amount of the proceeds would lead to building the business. Australian Financial Review reported that only 18 per cent of the funds would be utlised for expansion, while clearing down debts and licensing fees would occupy the major portion of the IPO raised.
