Edtech startup Adda247, which recently scooped up $35 million led by WestBridge, registered a 68% growth in scale during FY22. Like several growth stage companies, the company managed to grow its topline sharply, albeit on the back of rising expenses.
Adda247’s revenue from operation surged 68.3% to Rs 61.5 crore during the fiscal year ending March 2022 as compared to Rs 36.55 crore in FY21, as per the company’s annual financial statements with the Registrar of Companies (RoC).
Six-year-old Adda247 is a test prep platform for various government exams such as railways, banking, SSC, and public sector jobs focusing on tier II and III towns. The company provides online courses and classroom coaching services. Revenue from these services accounted for around 79% of the total operating revenue which grew 67.2% to Rs 48.5 crore in FY22.
Collection from the sale of books and e-books (including online courseware and physical deliverables) shot up nearly 3X to Rs 9.7 crore whereas the company also generated Rs 3.3 crore from partner network, sale of publications et al.
The startup also reported a non-operating income of Rs 2.5 crore (majorly from advertisement, it has a popular Youtube channel too) driving the total revenue to Rs 64 crore in FY22.
Moving towards expenses, employee benefits emerged as the largest cost center forming 32.5% of the total expenditure. This cost surged 70.8% to Rs 30 crore in FY22 from Rs 17.56 crore in FY21. Importantly, this cost also includes employee share-based payment of Rs 3.62 crore.
Payments made to faculty for providing educational services was another major cost and ballooned nearly 3X to Rs 22.2 crore during FY22. Spends on IT cum communication and legal professional fees jumped 2.4X and 2.8X to Rs 11.24 crore and Rs 9.4 crore respectively during FY22. The company also incurred Rs 8 crore in advertising & promotional expenses during the same period.
In line with revenue, Adda247’s total expenditure also soared 77% to Rs 92.4 crore in FY22 as compared to Rs 52.2 crore in FY21. While its spending increased faster than revenue, annual losses of the company expanded around 90% to Rs 28.8 crore in FY22 from Rs 15.2 crore in the preceding fiscal.
Coming to ratios, EBITDA margin and ROCE worsened to -41.72% and -38.47% during the year. On a unit level, Adda247 spent Rs 1.5 to earn a rupee of operating revenue during FY22. The expense-to-revenue ratio of the company is still better than most edtech startups, especially unicorns which are bleeding money to chase scale.
Unacademy spent Rs 5.15 to earn Re 1 while upGrad spent Rs 1.91 for the same. Byju’s spent thrice of its revenue in FY21. The company is yet to file FY22 numbers. As of FY21, Vedantu, LEAD, and Eruditius also spent 7.8X, 3.27X, and 3X as compared to their operating revenue respectively.
Founded by Anil Nagar and Saurabh Bansal, the Info Edge-backed firm is also making efforts to cover K-12, JEE and NEET, GATE segments. The startup claims to have over 20 million monthly active users and more than 30 million YouTube subscribers. Currently, it conducts over 10,000 live classes each month.
With its focus on examinations for government jobs and tier 2 and 3 cities, Adda247 has taken the brave decision to stick to online teaching, at a time many of its peers have gone with a hybrid model. That bet, if it pays off, will be seen as a strategic masterstroke or epic blunder, depending on the numbers we see by 2024. However, it needs to be stressed here that the firm has cut its teeth on digital already, and done a better than usual job of both reaching and delivering for its core user base with the medium. With a massive push for filling up vacancies in government jobs heading into the 2024 general elections, Adda247 finds the stage set to build on its investments.