MC Interview: upGrad to turn profitable in 2022-23, likely to float IPO in 2 years: Co-founder Mayank Kumar

Edtech unicorn upGrad is set to become profitable in 2022-23 and thinking to get listed in the stock market possibly in 24 months from now, co-founder and managing director Mayank Kumar told Moneycontrol in an interview.

Kumar said his firm is set to cut losses and more than double its revenue in the fiscal ending 31 March 2022. This after the edtech clocked over Rs.302 crore of revenue in Fy21 and around Rs.210 crore of loss in the same timeframe. He said during the initial years, they need to invest more in people, products and outreach to become a successful company of future, and the losses should be seen with an investment perspective.

Kumar told Moneycontrol during the interview that upGrad aims to acquire more firms in the B2B, and corporate learning space; and they will finally unlock value for shareholders by floating IPO and going to the stock market. Edited Excerpts:

Q) Last year, you had earmarked $250 million for M&A activities and have acquired five to six firms since then. Have you exhausted all the corpus, and kept aside more funds for the acquisition of more firms?

We will have more corpus for acquiring more companies because from a core business perspective, we continue to grow. Yes, more capital is needed for business growth. We believe that if like-minded entrepreneurs come together, we can build a business of scale.

Q) upGrad is on an acquisition spree. What are the areas you wish to focus here on while evaluating M&A candidates?

Ans: I think there are a couple of areas -- B2B learning and B2B enterprise is definitely areas we are excited about. We feel that there's enough scope and potential there. It is highly fragmented, and we believe, we can do something meaningful there. India is a big market...once we know that in India we are fully consolidated, we shall look at international markets.

Q) You said this quarter may become profitable for you. But if you look at numbers: your loss was around Rs. 211 crore in Fy21, three-fold more than the year before period. How to justify that?

Ans: One needs to realize that we are a different type of firm. A lot of our cost that goes in is actually payroll, for building products, for building technology products, building their skills, for building content. These are all investments right now. So technically speaking, these are not put up as Capex, while in previous time where accounting wise you can put everything as capex. While I agree that the loss has gone up, but these are investments to build products of the future.

Number two, we are in an ecosystem or a market where the behaviour is not there. And you have to set the behavior. When you are setting the bevaviour, you do need to invest in changing and making sure that the ecosystem behavior also changes. You do want to invest in making sure the consumers are aware, and are looking at things in a much more favorable manner.

Q) Your revenue was around Rs.302 crores last fiscal; how are you placed in FY22 given that you have just two months left in the fiscal?

And: Our revenue will more than double the previous number, and our growth will sustain. We have been almost doubling year on year. The reason why the growth happens is that you are pushing and making things happen; your learners are achieving success and getting good RoI. That’s making learners come to us. Education, unlike other sectors, takes time to show the result. We are seeing learners’ success and feeling satisfied; when we see profitability, I will be equally excited because we have shareholders to respond and answer to.

Q) When are you going to be a profitable company?

Ans: We are expecting this quarter to be profitable. And yes, we will become a profitable company in 2022-23.

Q) When will upGrad float an IPO to go public?

Ans: If your end goal is where will you unlock value, then listing is the place where we will look at to unlock value, or at least providing the right liquidity for our shareholders.  The exact timeline is yet to be defined… and it’s going to be at least two years away because there is a fair bit of work we need to do to get to the listing day. There is a lot of building blocks we need to set up.

I would say, may be give and take, 24 months on the median side is what we are thinking about. And that is definitely a goal. So 2024-25 may be the time when we will potentially be there.