Iron Pillar-backed Testbook’s scale grew nearly 2X in FY21

The edtech space has been hyperactive in the past two years. About 185 startups in the space have raised over $7 billion since 2021 with several early movers raising back to back rounds at staggering valuations. However, the segment got a reality check in recent months with mass layoffs and some early stage startups going under.

While it has been rare to see a VC-backed edtech company that didn’t raise capital in the past two years, Mumbai-based Testbook is an exception as it chose not to raise money after February 2020 and grow on its own terms. The company is yet to file its annual financial statement for FY22 but it managed to grow at a fast pace in FY21.

Testbook’s revenue from operations surged 85.8% to Rs 22.3 crore in FY21 from Rs 12 crore in the previous fiscal year (FY20), as per its annual financial statements filed with the Registrar of Companies (RoC).

Founded in 2014, Testbook helps students from smaller cities prepare for government exams through live classes, mock tests and quizzes. Till date, it has raised around $13 million from Iron Pillar, Matrix and a clutch of angel investors. The firm primarily makes its money from selling online courses and mock test papers which soared 85.8% to Rs 22.3 crore in FY21 from Rs 12 crore in previous fiscal year (FY20).

The company’s non-operating revenue (interest income) jumped 2.9X to Rs 2.51 crore in FY21 from Rs 86 lakh in FY20.

In line with revenues, Testbook’s total expenses jumped 2X to Rs 58.4 crore in FY21 as against Rs 29.05 crore in FY20. It spent 37.2% of the total cost on employee benefits which formed the largest cost center for the company, rising by 91% to Rs 21.73 crore in FY21.

Advertisement and promotions make up 29% of the cost and shot up 4.2X to Rs 16.91 crore in FY21 from Rs 4.02 crore in FY20. IT along with live streaming costs grew 71.2% to Rs 4.88 crore in F21 from Rs 2.85 crore in the previous fiscal year (FY20).

With a 2X jump in expenses, the company’s cash outflows grew 6.4X to Rs 10.60 crore in FY21 from Rs 1.65 crore in FY20. Losses consequently kept pace with revenue, jumping 2X to Rs 32.5 crore in FY21 from Rs 15.3 crore in FY20. On a unit level, the company spent Rs 2.62 to earn a single unit of operating revenue.

With its focus on government exams (jobs). Testbook needs to maintain a very diversified roster of teachers and trainers, even as it targets smaller cities. Thus, with its focus on set syllabi, patterns and testing, the lower costs of training possibly are matched by the increasing complexity of demand across the country, in terms of multiple languages etc. It will have to be wary of the brand being seen to be good for only one type of exam, even as competition is intense for the more prestigious options like UPSC entrance. It’s a tough balancing act, and getting it right, even while improving its margins, will be the key to surviving and even thriving in the market.