TOKYO -- India's online education startup Vedantu is aiming to double its revenue even as the boost the company received from pandemic-related restrictions fades, its CEO told Nikkei Asia.
The aggressive expansion strategy comes after the company joined the country's club of unicorns -- private companies worth $1 billion or more -- in September following a $100 million funding round led by an investment fund affiliated with Singapore's Temasek Holdings. Indian edtech giants are emerging at a time when their Chinese peers have seen their valuations plunge after Beijing tightened industry rules in August.
Vedantu offers live online courses for K12 -- kindergarten to 12th grade -- students and has seen users soar during the pandemic as schools and tutoring classes were forced to close. It says it has 200,000 paying users and that last year's revenue has increased by 4.5 times over the previous year.
With COVID cases in India declining significantly since a deadly wave in April and May, it remains to be seen if Vedantu and other startups are able to keep their users after the economy starts to reopen and in-person classes resume.
"I don't think these growth rates will be sustainable, and there will be some normalizations," co-founder and CEO Vamsi Krishna said in an interview. "Revenue growth should come back to two times [year-on-year] but two times at minimum, because the awareness of the category has really shot up in the mind of the parents."
Vedantu co-founder and CEO Vamsi Krishna says his company will expand into language instruction and go international "either through organic or inorganic efforts." (Photo courtesy of Vedantu) Krishna said the slower growth rate will still get Vedantu closer to its target of $500 million in annualized revenue, compared with its current run rate of $65 million, in about two and a half years. Hitting that goal will pave the way for an initial public offering, he added. "IPO is one pit stop. You are looking for a sustainable company which continues to grow even after that," he said.
India is believed to have the most children and teenagers in schools, with 250 million enrolled students. Like many of its Asian peers, the country's school entrance exams rely on standardized tests and a large private tutoring industry exists to help students prepare for them. A survey by India's National Statistical Organization, conducted between July 2017 and June 2018, showed that about a fifth of Indian students receive some form of private coaching.
While the Chinese market quickly became crowded with online education companies, India faced challenges due to low internet penetration. That began to change with the rise of affordable, high-speed internet and widespread adoption of smartphones. The trend was accelerated during the pandemic, prompting teachers and parents to turn to online channels.
Krishna first started a face-to-face coaching business, before tapping the power of the internet to connect talented teachers in cities with students in remote areas. Vedantu launched live online classes around 2014 with one-on-one lessons, before evolving to a class format in which a teacher gives lessons to many students.
Today, more than 300 students can participate in a single class. Vedantu's software helps teachers interact with students across the screen, such as by running quizzes or by measuring the level of a student's engagement.
Profit margins generally improve as more students log on to each class. But profitability remains a challenge for Vedantu and its rivals, because the flood of capital that has flowed into the Indian edtech market is intensifying price competition and a race to recruit the best teachers.
Vedantu is just one of five edtech unicorns in India. Byju's, considered the largest edtech player with an estimated 80 million registered users, raised $350 million in June from a group of investors and has gone on an acquisition spree in India as well as the U.S., expanding its offerings from coding schools to physical fitness academies. Unacademy, another rival backed by SoftBank Group and Temasek, is also acquiring startups at a frantic pace.
Vedantu has joined the frenzy by making its first two acquisitions this year. Krishna said the company would continue to focus on K12 education but will expand its product lineup within the category, such as curricular courses for grade one through five, courses in local languages and going international. "We're venturing into these things, either through organic or inorganic efforts," he said.
The intense battle for market share in India's edtech market stands in contrast to China, which announced a sweeping crackdown on after-school tutoring companies in August, requiring all existing companies to register as non-profit and barring foreign investment in the industry, in part to reduce pressure on parents and children.
Chinese education giant TAL Education Group, which invested in Vedantu in 2018, has seen its share price plunge in recent weeks. Krishna says, however, he still looks up to the company as a role model.