Gurugram: WestBridge-backed edtech unicorn LEAD School will reduce its Ebitda burn in FY24 by two-thirds and become profitable in the next financial year, the company’s co-founder and CEO Sumeet Mehta told Mint in an interview.
“We’ll have very good improvement on the Ebitda because we’ve been on this path to profitability… and will reduce our Ebitda burn to 1/3 to a negative 100…but what is more pertinent is how many schools continue with us here on, and how many new schools will we add,” said Mehta on the sidelines of the second edition of the ASU+GSV & Emeritus Summit in Gurugram.
Ebitda is earnings before interest, taxes, depreciation, and amortization, and is a key metric of profitability.
The Indian edtech space has been though a turmoil, as schools and coaching centres have tried to adapt to the changing landscape of teaching between online and offline formats. The shifting sentiments and pre-pandemic modes of learning have pushed several companies to realign their business structure and initiate a slew of cost-cutting measures including layoffs and shuttering offices to remain afloat amid a liquidity crunch.
Experts in the industry have said consolidation is happening in the edtech sector, as very few players have been able to withstand the post-pandemic stress of funding crunch.
“I think more than consolidation, honestly, what is happening is a lot of businesses which got set up during covid don’t have a viable model. But they might have a good product platform or might have a good thing, so they get absorbed, either as acqui-hires or some other way…everybody’s going to look for some exit,” Mehta said.
Last year, LEAD acquired the local K-12 learning business of Pearson India to widen its reach in over 9,000 schools across India. “Similarly, there are other players who have access to opportunities for us to develop good solutions, but they do not have a GTM (go-to-market strategy). You might have a great English solution, but not be able to sell because selling to schools is expensive,” he added.
Talking about the potential of artificial intelligence (AI) and hybrid learning, the edtech unicorn’s CEO emphasised that it is more about how teaching tools have largely become multimodal in a school system. While older teaching practices involve conventional methods like a blackboard, chalk and a book, there is now an increasing penetration of smartphones, smartboards and other similar tools to track learning and monitor distribution and school admissions.
Edtech startups have also battled a broader funding crunch, as high interest rates, uncertain macroeconomic and geopolitical factors have made investors wary of betting on these companies.
“They (investors) see growth, profitability and visibility of future revenue. Investing decision is a function of timing, where the expectation of the founder, and the readiness of the investor has to meet. Currently, the investors pool of money has much better usage due to higher interest rates at the moment. When that goes down, things will improve,” Mehta said.
In FY23, LEAD School’s net loss fell 18.5% to ₹321.9 crore, from ₹395.3 crore a year earlier. Founded by Mehta and Smita Deorah in 2012, the company works with more than 9,000 schools in over 20 states in India and counts US-based GSV Ventures among its investors.
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Published: 19 Feb 2024, 05:45 AM IST