In the financial year ending FY21, Eruditus had reported a cash loss of $31 million, filings reviewed by ET showed. The Mumbai-based edtech unicorn’s total net loss swelled by 46% to $386.82 million, including exceptional items, the filings showed.
The company’s net cash used in operating activities during the year under review also grew over three times to $110.99 million from $30.11 million a year ago.
The edtech company, which partners with leading universities such as Harvard, Columbia and MIT, in addition to Indian management institutions, including the Indian School of Business (ISB) and various Indian Institutes of Management (IIMs) for its higher learning courses, saw its US business lead revenue growth by expanding almost two-and-a-half times.
Of the total revenues during FY22, Eruditus’ operations in the US accounted for $119.61 million — almost half of the total amount — followed by Asia and the Asia Pacific region with $54.18 million. The company offers its services in the US, the UK, India, the UAE, China, Mexico and Singapore.
From the total revenue of $245.26 million, Eruditus also paid $108.02 million as programme fees to schools.
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During the year, the company burned significantly more cash on marketing, technology and consultancy expenses. During the year 2021-22 (July-June), it spent $141.61 million as against $67.09 million in the year-ago period. The firm also saw its salary bill grow over three-fold to $107.07 million during the year, against $32.42 million in the year-ended June 2021. Eruditus’ total employee benefit expense, however, grew just about 5% on-year to $262.15 million.
Notably, a major component of the company’s employee benefit expense was stock appreciation rights (SARs), which fell year-on-year by 30% but still comprised nearly 57% of the total employee benefit expense at $149.24 million in 2021-22 (July-June).
SARs are linked to the company’s valuation, and are similar to employee stock options (ESOPs), but with SARs, employees do not have to pay the exercise price. Instead, they receive the sum of the increase in stock or cash.
Excluding the programme fees paid to schools, Eruditus’ total expenses from operating activities stood at $378.43 million during FY22, compared to $264.49 million in FY21.
In August 2021, the company had raised $650 million in a round led by SoftBank and Accel back in August 2021. The equity fundraise, which also included a secondary component, valued the company at $3.2 billion, marking its entry into the unicorn club — startups having a valuation of at least a billion dollars.
To put Eruditus’ revenue of $245.26 million into perspective, the company’s key competitor, Temasek-backed UpGrad, reported around $92 million in revenues for the year-ended March 2022, almost three times more than the previous year. UpGrad’s total expenses also more than doubled during the period under review.
Edtech challenges
In 2021 and the early part of 2022, edtech companies spent significant amounts on marketing to chase growth — a strategy that took a backseat after venture funding started becoming scarce, especially for late-stage startups.
Eruditus, too, laid off around 40 people from its talent acquisition team less than three months after it closed its debt financing round.
The funding winter, which has been especially painful for edtech platforms, has also begun translating into valuation resets.
On Friday, ET reported that BlackRock, the world’s biggest asset manager, slashed the value of its investment in Bengaluru-based edtech Byju’s by nearly 50% to almost $11 billion, down from the $22 billion valuation ascribed during its last fundraise in October 2022.
Edtech companies such as Byju’s, Unacademy and Vedantu, which saw a boom during Covid-19, suffered heavily once the pandemic receded and schools and other offline education centres reopened. While overall funding slowed down for startups, edtech firms bore the brunt.
These startups received $3.1 billion in venture funding in 2022, a drop of over 42% from the $5.4 billion in 2021, according to data sourced from Tracxn.
On Thursday, ET reported that SoftBank-backed Unacademy undertook yet another round of layoffs, firing 12% of its workforce as it faces pressure to cut down its cash burn rate. Unacademy founder and chief executive Gaurav Munjal on Friday announced that the company’s leadership, including the founders, would take a permanent salary cut of up to 25%.