SUMMARY
In FY20, upGrad’s total revenue increased 91% to INR 163 Cr from INR 85 Cr in FY19
Expenses surged from INR 129 Cr in FY19 to INR 241 Cr, as the company scaled up and hired more employees
The filings note that the company has accumulated losses and its net worth has eroded in the past fiscal year, which reflects the pre-pandemic performance
Mumbai-based higher education edtech platform upGrad saw its loss increase 84% year-on-year (YoY), from INR 43 Cr in the fiscal year 2018-19 (FY19) to INR 79 Cr in FY20 which ended March 31, 2020.
During the same period, the company’s total revenue increased by 95%, from INR 85 Cr in FY19 to INR 163 Cr in FY20. However, the healthy increase in revenue was offset by an 87% growth in the company’s expenses, from INR 129 Cr in FY19 to INR 241 Cr, leading to an increase in the company’s net loss for the year.
The company mainly derives its revenue from three streams — revenue form the students for the various programs, revenue from the universities for the various programs run on their behalf and revenue from the enterprise programs.
According to the company’s filings with the ministry of corporate affairs (MCA) sourced from Tofler, the increase in expenses was caused by spending surging across the board. The cost of materials consumed increased by 58% to INR 32 Cr; while employee benefits expense rose by 89% to INR 89.9 Cr and other expenses, which includes the amount spent on rent, fuel, conveyance, advertising and legal services, almost doubled from 2019 to INR 114.5 Cr.
The filings note that the company has accumulated losses and its net worth has eroded. “However, the financial statements have been prepared by the management on the basis of future business plans and financial support from its promoters,” read the filings.
While the filings don’t mention the impact of the Covid-19 pandemic on the company’s revenue, it was reported in April last year that upGrad had introduced salary cuts to the tune of 30% for its employees, based on seniority. The company had cited the uncertainty amid the pandemic as the reason for the pay cuts.
However, the company went on to claim that it had seen major growth spikes from late-February onwards, specifically the week between February 24 to March 2, 2020, with almost 34% hike in usage compared to the previous week. Then, in the first week of March, the company’s traction went up by 75%. Moreover, the enquiries on the platform also increased by 50% from 2,500 to 3,800 per day.
Buoyed by the increase in traction, the company in July revoked the pay cuts and announced that the amount deducted would be reimbursed to the affected employees. Earlier this month, the company announced ESOPs (employee stock ownership plan) for 600 of its 2,500 employees.
Founded in early 2015 by Ronnie Screwvala, Mayank Kumar, Phalgun Kompalli and Ravijot Chugh, upGrad primarily focusses on higher education courses in collaboration with various universities. It claims to have half-a-million users globally, of which 30,000 are paid learners. In 2020, upGrad acquired recruitment and staffing solutions company Rekrut India and Bengaluru-based coaching institute The Gate Academy (TGA). In August, the company raised INR 50 Cr debt from IIFL Income Opportunities Fund.
It is expected that the company’s financial performance will be somewhat better at the end of the current fiscal year (FY21), given that most Indian edtech platforms have recorded a significant improvement in key performance indicators from March 2020 onwards. This was because with work-from-home (WFH) protocols in place for most companies, people looked to prepare for a job market dramatically altered by the pandemic. Moreover, with schools and college classes happening online, students ramped up their preparation for competitive exams during the countrywide lockdown amid the pandemic.
The edtech sector also emerged as one of the four best performing sectors in terms of funding raised by Indian startups. In 2020, Indian edtech startups raised total funding worth $1,434 Mn. In terms of the number of funding deals, edtech ranked third, with 101 funding deals in the sector. Moreover, of the 81 mergers and acquisitions (M&As) witnessed in the Indian startup ecosystem in 2020, edtech had the largest share, accounting for 16% of M&As or 13 deals in the sector.
