Byju’s-linked exceptional costs drag Aakash into Rs 2,443 Cr loss in FY24

Aakash Educational Services Ltd (AESL) reported a loss of Rs 2,443 crore in the fiscal year ended March 2024, largely due to exceptional items linked to its parent, Think & Learn Private Limited (Byju’s). These included high finance costs and provisions related to loan defaults, repayments, and write-offs involving the related party. 

Aakash Educational Services’ revenue from operations remained flat at Rs 2,438 crore in FY24, compared to Rs 2,399 crore in FY23, according to its consolidated financial statements sourced from the Registrar of Companies.

Aakash Educational Services offers coaching for NEET, IIT-JEE, Olympiads, and NTSE through classroom and distance learning programmes for medical and engineering aspirants. Student fees formed 96% of its total revenue and rose 2% to Rs 2,341 crore in FY24.

The remaining income came from the franchisee model, which declined 8.5% to Rs 97 crore during the period.

Aakash Educational Services also recorded Rs 433 crore in non-operating income, mainly from interest, manpower services, and unwinding of discounts on security deposits, which took its total income to Rs 2,471 crore in FY24.

Employee benefits, which include staff and faculty expenses, formed the largest cost for Aakash Educational Services and accounted for 56% of total expenditure. This expense rose 14% to Rs 1,411 crore in FY24 from Rs 1,239 crore in FY23. Depreciation and amortization expenses also surged 28% to Rs 259 crore in FY24.

Advertising and promotional expenses, study material costs, legal and professional fees, IT expenses, franchise fees, and other overheads pushed the total expenditure of Aakash Educational Services up 14% to Rs 2,532 crore in FY24 from Rs 2,225 crore in FY23.

Importantly, Aakash Educational Services booked Rs 2,720 crore in exceptional items, largely related to its insolvent parent, Think & Learn Private Limited (Byju’s), which led to a net loss of Rs 2,443 crore in FY24.

Of the total exceptional items, Rs 1,363 crore was recorded towards interest and loan obligations, likely linked to Byju’s, while Rs 780 crore in loans extended to the related party were written off. The company also recorded a one-time charge of Rs 100 crore as a termination fee following the end of its service agreement with Think & Learn on May 6, 2023. Other exceptional expenses included impairment of goodwill worth Rs 102 crore, write-down of intangible assets worth Rs 300 crore, and other adjustments.

Aakash Educational Services declined to comment on queries sent by Entrackr seeking clarity on the exceptional items.

Excluding the impact of exceptional items and deferred tax, Aakash Educational Services Limited reported a loss of Rs 61 crore during the period, compared to a profit of Rs 153 crore in FY23.

These exceptional items pushed Aakash Educational Services into heavy losses; however, it remained EBITDA positive at the operational level, reporting an EBITDA of Rs 307 crore. Its ROCE and EBITDA margin declined to 6.76% and 12.57%, respectively, in FY24.

On a unit level, the company spent Rs 1.04 to earn one rupee in FY24. As of March 2024, it reported current assets of Rs 315 crore, including Rs 315 crore in cash and bank balance.

Recently, Think & Learn (Byju’s) moved the Supreme Court against Aakash’s Rs 240 crore rights issue, challenging NCLAT’s approval of the fundraise. The court refused to grant a stay, permitted Aakash to continue with the issue, and gave Think & Learn the right to subscribe in line with its shareholding.

While the ownership of Akash might be a mess, there is little doubt that the original founders, JC Chaudhry and the rest of the team did a great job in building a brand that has survived the mishap that has been Byju’s. With the founders no longer in charge, having been prescient enough to take most of the $1 billion valuation in cash from Byju’s earlier,  the firm remains one of the few valuable parts of the broken Byju’s edtech puzzle. Ranjan Pai, who has the largest stake, has a task at hand to turn around the firm. A significant part of the process is largely out of his hands due to the multiple legal tangles involved, but Akash did well to maintain share despite all the challenges till FY24. It is also clear that the firm has ceded ground subsequently, to Physicswallah and others, and FY25 numbers, when they are finally filed, will give a much better picture of that. Some tough decisions have had to be taken, including the shutdown of its digital classrooms. The brand might be sliding for now, but don’t put it past the right team to ensure it lives to fight again, if it can somehow start with a clean slate again.