upGrad Raises $40 Mn From World Bank’s IFC At $850 Mn Valuation

Online higher education company upGrad has raised $40 Mn in another funding round from the International Finance Corporation (IFC), a sister organisation of the World Bank. The round has brought down the promoters’ holding in the firm to 75%. Earlier this week, the company had secured $120 Mn in funding from Temasek in the company’s first external funding round. 

With the recent funding, upGrad is valued at $850 Mn, and could soon join BYJU’S and Unacademy in the edtech unicorn club. 

The company will use the funds to scale its operations in international markets, pursue mergers and acquisitions in the edtech space and expand its graduate and postgraduate degree portfolio. The company aims to achieve revenue worth $2 Bn by 2026. 

Founded by Ronnie Screwvala, Mayank Kumar, Phalgun Kompalli and Ravijot Chugh, upGrad offers higher education courses in collaboration with various universities. It claims to have a million users globally, of which 45,000 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 last year, the company raised INR 50 Cr debt from IIFL Income Opportunities Fund.

Screwvala claimed that while upGrad’s FY20 revenue run rate was INR 230 Cr, the FY21 numbers have been much better with a monthly revenue run rate of INR 100 Cr. 

This was because the company could double down on its student base, as the Covid-19 pandemic-induced work from home spurred many to enrol in professional courses for upskilling. 

Screwvala added that upGrad had no plans for an IPO explaining that at INR 1,200 Cr revenue run rate, the company is too small for the equities market. 

In the fiscal year ended March 2020 (FY20), upGrad’s 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 84% increase in the company’s net loss to INR 79 Cr. 

The company earns revenue from three streams — student fees for the various courses, revenue from the universities for the various programs run on their behalf and revenue from the enterprise programs.

Indian Edtech Sector: A $10 Bn Opportunity

With a market size of $2.8 Bn in 2020, the Indian edtech sector is expected to grow at a compound annual growth rate (CAGR) of 39% to reach a market size of $10.4 Bn by 2025, highlights an Inc42 Plus report, “The Future Of Edtech In India: Decoding the $10 Bn Market Opportunity”. Some of the major factors driving the adoption of edtech apps in India will be convenience and cost-efficiency of the products and services, a surge in out-of-pocket expenditure on education and a rise in course fees. 

Test preparation, K12 learning, online certification and skill development are expected to be the major drivers of demand for Indian edtech startups in the coming years.