Vedantu spent Rs 736 Cr to earn Rs 94 Cr during FY21

Tiger Global-backed edtech firm Vedantu became a unicorn in September last year after raising a $100 million Series E round led by ABC World Asia. However, the market has tightened up considerably since then for edtechs, as several startups fired hundreds of employees while a couple of them chose to shut down their operations in the past two-three months. But at least for the year ending March 2021, Vedantu perhaps had no inkling of the times to come. Or going by their numbers, did they? You judge for yourself.

Vedantu, which also sacked more than 600 employees in two phases, has recently filed its annual financial statement for FY21 with RoC. On the back of the pandemic, the company’s operating revenue grew 3.8X to Rs 93.7 crore in FY21 as compared to Rs 24.6 crore in FY20.

Most of the revenue for the company came from online tutoring of various course modules catering to various categories of students.

The company also has its other income contributing significantly thanks to interest on deposits and gain on sale of current investment which grew 3.6X to Rs 41.24 crore in FY21 from Rs 11.26 crore in the previous fiscal year (FY20). It's worth noticing that 30% of the total income is ‘other income’  from the interest of fixed deposits and gain on sale of investments which has nothing to do with Vedantu’s operations.

Moving over to the cost sheet, employee benefits expenses emerged as the largest cost center for the company forming 55% of the overall expenses. This cost grew 4.6X to Rs 407.5 crore in FY21 from Rs 88.3 crore in FY20. Employee benefits expenses also include Rs 20 crore as employee stock option (ESOP) expenses which was settled in cash during FY21.

The cost of advertising and promotion was the second major cost which surged 5.8X to Rs 177.4 crore in FY21 from Rs 30.5 crore in FY20. For context, Vedantu had sponsored the famous TV show Kaun Banega Crorepati and roped in film star Amir Khan as brand ambassador during FY21.

The cost for conducting seminar conferences grew 35.4% to Rs 18.43 crore in FY21 from RS 13.60 crore in FY20. The Vamsi Krishna-led company spent Rs 29.8 crore combined on IT and training recruitment which pushed its total expenses to Rs 736.13 crore in FY21 as compared to Rs 185.97 crore in the previous fiscal year (FY20).

Those high costs meant losses at the edtech unicorn inflated 4X to Rs 604.28 crore in FY21 from Rs 150 crore in FY20. A little ahead of revenue growth. 

With the burden of huge expenditures, cash outflows of Vedantu shot up 3.6X to Rs 517.56 crore in FY21 which further worsened its ROCE and EBITDA margin. On a unit level, the company has spent Rs 7.86 to earn a single unit of operating revenue.

Out of the seven edtech unicorns which include Byju’s, Unacademy, UpGrad, LEAD, Eruditus and PhysicsWallah, Vedantu had the highest expense to revenue ratio in FY21. Unacademy spent Rs 5 to earn a single rupee of revenue followed by LEAD, Eruditus and UpGrad with the expense to revenue ratio of 3.27, 3.03 and 1.7 respectively. While PhysicsWallah was profitable in FY21, Byju’s did not file its annual financial statements for the year. The company was profitable in FY20 on a standalone basis.

Vedantu’s numbers for FY21, a year when the impact of the pandemic was felt most severely, are frankly underwhelming. FY22 will perhaps tell a different tale. But with the edtech environment having changed completely with the opening up of educational institutes, it is ironic how most of the ‘online plays’ have rushed to go offline themselves. The ‘one on one’ model Vedantu started with is well and truly buried. Now, these edtechs face the formidable challenge of delivering the same speed of growth with offline plays, without the concomitant increase in losses.