Churn Rate

## What it is Churn rate measures how many customers (or how much recurring revenue) a business loses in a period, usually a month or a year. Customer churn = customers lost ÷ customers at the start of the period. Revenue churn measures the recurring revenue lost. It is the opposite of retention — if a subscription business retains 90% of customers a year, its annual churn is 10%. Low churn means customers stick; high churn means the business is leaking value.

## Why it's so important For any subscription, SaaS, telecom, streaming, or recurring-revenue business, churn is destiny. Acquiring a customer is expensive (high Customer Acquisition Cost, CAC), so the company only earns a return if the customer stays long enough — measured by Lifetime Value (LTV). High churn shortens LTV, ruins the LTV/CAC ratio, and forces the company onto an exhausting treadmill of replacing lost customers just to stand still. Even small differences in churn compound dramatically over years.

## Churn in the Indian context Churn is a make-or-break metric across several big Indian sectors:

- Telecom: Jio, Airtel and Vi obsess over subscriber churn and ARPU — churn data is reported to TRAI, and mobile-number portability makes switching easy, so retention is fiercely contested. - OTT/streaming and edtech: notoriously high churn as users subscribe for one show or course and cancel. - SaaS and new-age listed companies: Indian SaaS exporters and recently listed platform/fintech firms are judged heavily on churn alongside Net Revenue Retention (NRR) — investors scrutinise it to separate durable businesses from those buying growth.

## How investors use it - Low and falling churn signals a sticky product, pricing power and improving unit economics — a positive for valuation. - Rising churn is an early warning that often precedes a revenue slowdown, even while headline numbers still grow on new additions. - Always read churn with NRR and gross retention: a company can have some logo churn but still grow revenue if remaining customers expand (NRR > 100%).

Bottom line: churn rate is the single clearest gauge of customer loyalty and the health of a recurring-revenue model. For investors in India's telecom, OTT, SaaS and fintech names, a low, stable churn rate is one of the strongest indicators of a durable, compounding business.