Edtech decacorn Byju’s has been in the headlines for the last few weeks for back to back acquisitions. The company has recently taken over Scholr while it is close to acquiring Toppr and Aakash Educational Services. But the deal which started it off was the $300 million worth acquisition of WhiteHat Jr in August last year.
WhiteHat Jr’s acquisition by Byju’s was one of the largest merger and acquisition deals in the Indian startup ecosystem in 2020. While there could be several merits behind the acquisition, WhiteHat Jr’s consistent growth and $150 million annual run rate or ARR in a few months of FY21 appeared to have triggered Byju’s appetite.
Let’s take a look over WhiteHat Jr’s audited financials for the fiscal year ending March 2020. In its first full year of operations, the company’s revenue from operations stood at Rs 16.2 crore. It’s worth noting that WhiteHat Jr was operational for five months in FY19 in which it posted a revenue of Rs 6.7 lakhs.
It earned another Rs 1.72 crore via interest on deposits. During FY20, the company’s total assets grew to Rs 64.2 crore and it held 85.4% of its assets as bank balance and fixed deposits in FY20.
Business promotion costs including commission and incentive payments stood out as the largest cost centre for WhiteHat Jr which made up one-third of the company’s annual expenditure. Such expenses grew to Rs 23.8 crore in FY20 from Rs 32.3 lakhs spent in FY19.
At Rs 21.4 crore, expenses on employee benefits emerged as the second-largest cost for the edtech startup, accounting for 30% of the total expenses incurred during FY20. Out of these, Rs 6.06 crore were booked as employee stock option expenses.
Salaries paid to teachers, who impart coding skills to kids in the age bracket of 6 to 18, stood at Rs 10.95 crore; i.e. 15.4% of the total expenses incurred.
Legal and professional fees paid by the company grew to Rs 8.65 crore paid in FY20. Software related costs for the online learning platform accounted for another Rs 1.27 crore during the same period.
Unexplained miscellaneous expenditure also added Rs 1.1 crore for the fiscal ended in March 2020. Further, rental costs of Rs 3.26 crore pushed the total expenditure to Rs 71.24 crore during FY20.
WhiteHat Jr spent Rs 4.46 to earn a single rupee of operating revenue in the last fiscal.
Its annual losses surged to Rs 53.3 crore during FY20 while the EBITDA margin stood at 294.89%. During five months of FY19, the losses were recorded at Rs 2.6 crore.
Notably, WhiteHat Jr’s auditors KPMG (BSR & Co LLP) had resigned on 21 December 2020 due to a “potential independence issue”. The Mumbai based company had appointed KPMG after its first auditor Vinay Hingu & Co resigned on 23 Feb 2020. The latter was appointed for a term of five years at the AGM held on 30 September 2019. Following its acquisition by Byju’s the company’s ownership had changed from 5th August 2020.
The financial performance of WhiteHat Jr in FY20 has been impressive as the startup managed to cross Rs 16 crore in revenue in its first full year of operations. When we compare this with the performance of other early-stage startups, it’s certainly a feat.
While WhiteHat Jr didn’t face much competition in FY20, the company is facing some challenges in the ongoing fiscal.
Besides large edtech players including Unacademy and Cuemath offering kids-focused coding classes, several direct competitions such as Newton School and Camp K12 had raised funds and gearing up to take on WhiteHat Jr, making the space burning hot for investors, founders and users alike.