Strategic and Financial Model Analysis of Edu-Tech Companies

PROJECT REPORT

STRATEGIC AND FINANCIAL MODEL ANALYSIS OF EDU-TECH COMPANIES

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                                                       ARPAN BHATTACHARYA

                                                       IFMR SRICITY

BYJU’S-

ABOUT THE COMPANY- 

BYJU’S - The Learning App is the popular brand name for Think and Learn Private Ltd., a Alipur-based Educational technology (edtech) and online tutoring firm. It was founded in 2011 by Byju Raveendran at Alipur, Karnataka, India. BYJU'S was the first investment in Asia from the Chan Zuckerberg Initiative.It is considered to be one among the only few Indian consumer startups that has gone global, particularly with the 2017 acquisition of TutorVista.

 It was incorporated on 30 November 2011, the startup has secured $244 Mn in funding so far, has over 15 million  users, with close to 900K paid annual subscriptions and a high annual renewal rate of 90%. The company claims to be on track to annual profitability in FY17-18 and is also working on launching its international products by the end of next year. It had acquired Tutorvista and Edurite from Pearson in July 2017  for the purpose of going global and benefitting from the organic diversification and global demand growth.

PRODUCTS &SERVICES-

The smartphone app named BYJU’s the learning app serves educational content mainly to school students from primary levels to higher secondary levels.It also trains students for competitive examinations in India such as IIT-JEE, NEET, CAT, IAS as well as for international examinations such as GRE and GMAT.

The content is delivered through a mix of short videos with embedded animations and are explained very well visually thus increasing learning outcomes.The focus is on Maths and science where the contextual clarity is demanded for. BYJU'S reports to have over 15 million users overall and about nine lakh paid subscribers on an annual basis  and an annual retention rate of about 90%.

PROBLEM STATEMENT-

The motive is to connect with students across categories for competitive exams preparation and subject preparation across different standards at an affordable rate.

FINANCIAL MODEL OF BYJU’S-

The company operates roughly on a free+premium based business model in which a paid subscription is required for viewing the majority content after the introductory videos. As of April 2018, the company has raised around $244 million.The major investors and stakeholders include Chan Zuckerberg Initiative (CZI), Sequoia Capital, Sofina, Lightspeed Venture Partners, Verlinvest, Aarin Capital and Times Internet (Times of India group).This was the first investment from CZI (co-funded by Facebook founder Mark Zuckerberg and Priscilla Chan) in Asia.

As per the company filings with the Ministry of Corporate Affairs, BYJU’S became a unicorn and is valued at US$1 billion (INR 6,505 Crore) in March 2018.

Financials-

In March 2018, Edtech startup BYJU’S quietly became India’s first edtech company to enter India’s unicorn club, crossing $1 Bn in estimated worth. With around 2500 employees, clocking a total employee related expense of $10 Mn annually, the edtech startup is pushing all the pedals to achieve an exponential growth reporting revenues of $36 Mn in FY16-17 and a Y-o-Y growth rate of over 100%. The startup claims to breakeven in another year.

BYJU’S saw its revenue more than double and its losses increase by 10% as compared to the last financial year in the FY 16-17. Gross revenue for FY16-17 jumped to $36 Mn (INR247 Cr) from $16 Mn (INR 110 Cr) in the previous year, clocking a 124% Y-o-Y growth.

On the expense front, BYJU’S was successful in impeding the year on year growing expense. The total expenses grew by 87% from $23 Mn (INR156 Cr) to $43 Mn (INR 291 Cr), while in FY15-16 this increment was 104%.

REVENUE TREND OF BYJU’S

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• The growth trajectory holds an exponential curve with an annual run rate(ARR) of $9.3million and a Compound Annual Growth Rate (CAGR) of 75%.
• The gap between revenue and expense has also come down by 57%, from -41% in FY15-16 to -18% in FY16-17.The startup can breakeven in the coming year if we forecast these numbers.
• The net loss, in FY16-17, grew by 19% pushing the number to $8.7 Mn (INR 59 Cr) from $7.2 Mn (INR 50 Cr). This is a definite improvement as compared to last financial year (FY15-16), when the losses surged by 43%.

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Ratio analysis-

Financial ratios are tools used to assess the relative strength of companies by performing simple calculations on items on income statements, balance sheets and cash flow statements.It stresses on important financial viability parameters like levels of liquidity,profitability,working capital management,solvency position of the firm.

The parameters considered for the ratio analysis are the current ratio,which measures the efficiency of the working capital management of the firm(inventory,investments in current assets,current liabilities);asset turnover ratios which implies the efficiency of the firm’s management in converting fixed and current assets into sales;and net profit margin implying how the levels of profitability are performing with changing cost structures and sales.