[What The Financials] With ARR Of $9.30 Mn And CAGR Of 75% – BYJU’S To Breakeven In Less Than 2 Years

In March 2018, Edtech startup BYJU’S quietly became India’s first edtech company to enter India’s unicorn club, crossing $1 Bn in estimated worth. With around 2500 employees, clocking a total employee related expense of $10 Mn annually, the edtech startup is pushing all the pedals to achieve an exponential growth reporting revenues of $36 Mn in FY16-17 and a Y-o-Y growth rate of over 100%. The startup claims to breakeven in another year. BYJU’S was also one of the potential unicorns that Inc42 Datalabs predicted in the “The Annual Tech Startup Funding Report 2017″.

Incorporated on 30 November 2011, the eponymously named startup has secured $244 Mn in funding so far, has over 15 Mn users, with close to 900K paid annual subscriptions and a high annual renewal rate of 90%. The company claims to be on track to annual profitability in FY17-18 and is also working on launching its international products by the end of next year. It had acquired Tutorvista and Edurite from Pearson in July 2017 precisely for the purpose of going global.

Why Does It Matter?

Not long ago, in 2011, BYJU’S was a plain run-of-the-mill classroom-based, test preparation startup. Its focus was helping students crack CAT (Common Admission Test held by IIMs).

There on, BYJU’S has incorporated online educational videos, weekend doubt-clearing classes, a learning app for students, online courses and much more. Presently it has courses for students from all the way from grade 4 to grade 12, along with test preparation courses for all the major competitive exams in India.

With such impressive growth and its entry into the unicorn club, we at Inc42 Datalabs found it imperative to investigate the financial health of the company.

Revenue Vs Expense:

In FY16-17, BYJU’S saw its revenue more than double and its losses increase by 10% as compared to the last financial year. Gross revenue for FY16-17 jumped to $36 Mn (INR247 Cr) from $16 Mn (INR 110 Cr) in the previous year, clocking a 124% Y-o-Y growth. On the expense front, BYJU’S was successful in impeding the year on year growing expense. The total expenses grew by 87% from $23 Mn (INR156 Cr) to $43 Mn (INR 291 Cr), while in FY15-16 this increment was 104%.

• The growth trajectory holds an exponential curve with an Annual Run Rate (ARR) of $9.3 Mn and a Compound Annual Growth Rate (CAGR) of 75%.
• The gap between revenue and expense has also come down by 57%, from -41% in FY15-16 to -18% in FY16-17. Continuing on this trend the startup can breakeven in the next two years.

Losses

The net loss, in FY16-17, grew by 19% pushing the number to $8.7 Mn (INR 59 Cr) from $7.2 Mn (INR 50 Cr). This is a definite improvement as compared to last financial year (FY15-16), when the losses surged by 43%.

Financial Ratios

Running a company involves continual examination and evaluation of its business performance. Financial ratios are tools used to assess the relative strength of companies by performing simple calculations on items on income statements, balance sheets and cash flow statements.

• The current ratio is mainly used to give an idea of a company’s ability to pay back its liabilities (debt and accounts payable) with its assets (cash, marketable securities, inventory, accounts receivable). For FY16-17, BYJU’S had a ratio just under 1. It indicates that a company’s liabilities are greater than its assets and suggests that the company in question would be unable to pay off its obligations if they came due at that point.
• Net profit margin is the percentage of revenue left after all expenses have been deducted from sales. The measurement reveals the amount of profit that a business can extract from its total sales. The net profit margin is intended to be a measure of the overall success of a business. A high net profit margin indicates that a business is pricing its products correctly and is exercising good cost control. Although the profit margin of BYJU’S in FY16-17 is negative (-20%), it has shown a positive growth trend over the last two years.

Closing Notes

India holds an important place in the global education industry. As per IBEF, the education market in India is currently valued at $100 Bn and is expected to nearly double to $180 Bn by 2020. This indicates that India has a huge market scope for education industry with the country literacy rate of 75%. The country has more than 1.5 Mn schools with over 260 Mn students enrolled and about 751 universities and 35,539 colleges.

However, despite such wide opportunity available to grow and nurture a talented youth at par with the global standards, the Indian students are far behind their western counterparts, leading to one of the major crisis for the Indian government – unemployability.

According to a report by Aspiringminds in 2016, only 19.11% of 1.5 million engineers of India are employable. Numbers further show more than 30% of India’s youth of age 15-29 years are neither in employment nor in education or training. This is more than double the OECD average and almost three times that of China.

This system of improper educational, as well as vocational guidance, has created a void in the market that the edtech startups are trying to fill in. Going by the numbers, today e-learning in India is pegged at $2 Bn and is expected to reach $5.7 Bn by 2020.

Companies like BYJU’S are making the K-12 road easy for both the students as well as parents. The courses are concept-based and are not heavy on the pocket in comparison to private tuitions and coaching classes. Plus flexibility offered in adopting a learning mechanism is far more engaging than the traditional methods of teaching.By providing curated and guided education courses, BYJU’S has been able to not only digitalise the system, but it has also been able to break through the shackles of traditional education methodologies.

Having consolidated its seat in the edtech sector of India and BYJU’S is now looking to expand to the Middle East, the US, the UK, South Africa and other African and Commonwealth markets. Going ahead, what new milestones this edtech unicorn will be able to achieve in the ongoing financial year, will be interesting to watch.

[This is a part of the What The Financials (WTF) series launched by Inc42 Datalabs. We would be exploring the financial health of Startups and discuss its key metrics of growth, to read more articles click here.]

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.