BackTwitter India clocks first net loss as staff costs rise 3-fold
The company reported a net loss of ₹31.84 cr in FY22, compared to ₹7.76 cr net profit in FY21
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The Indian business of Twitter, Inc. posted its maiden net loss in the last financial year on the back of higher employee benefit expenses. Data accessed from the corporate affairs ministry database showed that a more than three-fold jump in employee expenses outweighed a 81.5% surge in net sales at Twitter Communications India Pvt. Ltd during the year ended 31 March.
This was the first-ever net loss since the social media giant —now owned by billionaire Elon Musk—incorporated the Indian entity in February 2013. According to Twitter India’s regulatory filings, net sales in FY22 grew to ₹156.75 crore from ₹86.36 crore in FY21. However, employee expenses swelled to ₹136.81 crore in FY22 from ₹43.26 crore in FY21. This drove the company towards a net loss of ₹31.84 crore in FY22, compared to ₹7.76 crore net profit in FY21.
As of FY22, employee costs comprised 78% of Twitter’s expenses in India, up from 59% the year before. It is this expense that Musk seemingly cut down on when the company fired nearly all of its 230-250 employees in India on 4 November. Mint reported that the company had around 10 employees left in the country after the layoff exercise.
Musk had said in a tweet previously that Twitter was losing over $4 million per day, which made the employee restructuring necessary. “Everyone exited was offered 3 months of severance, which is 50% more than legally required," he added.
Industry experts believe that while Twitter India’s net sales rise was in line with a jump in ad revenue linked to increased online advertising amid the pandemic, the rise in employee expenses may have been a voluntary decision taken by the company to set up bigger operations in the country before the Musk takeover altered plans.
“The rise in net sales for Twitter could have only been linked to a rise in ad sales. While Facebook and Google offer information technology (IT) and data services in the country, Twitter does not sell any products in India apart from its digital advertisement stream. The spike in its earnings for FY22 is not unexpected, given that the aftermath of the pandemic saw growth in digital ads for most tech firms," said Akshara Bassi, a research analyst at Counterpoint India. However, Bassi said the spike in staff costs may have been a product of the rise in sales, as well as an effort to add more revenue streams to its domestic operations. Tech companies, including Meta and Google, had hired many new employees during the pandemic, expecting the impact of digitization to continue post pandemic. However, even Meta CEO, Mark Zuckerberg, admitted in a blog post on Wednesday that the impact had reversed as things returned to normal. Meta announced plans to layoff 11,000 employees on Wednesday.
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