Cuemath's Manan Khurma expects Indian business to grow slower than international ops over the next year, cites limited depth

The depth of the Indian market is limited compared to some of the western geographies when it comes to the edtech business, said Manan Khurma, founder and CEO, Cuemath. He added that he sees the company's revenue share from India falling by about 10 percent over the next year.

“Post Covid in India, we have seen some headwinds where a subset of consumers have said that they would prefer going back to offline, impacting some of our India plans. But our demand from non-India markets continues to grow as strongly as ever,” Khurma told Moneycontrol.

Khurma has joined a growing list of founders and venture capitalists to talk about India's over-valued internet market, which seems to be slowing post the pandemic-led boost.

According to Khurma, the Indian market constitutes about 35 percent of the company’s revenues, which will come down to 25 percent or less next year.

“Today, the majority of our revenue comes from outside India, even though India is our home market, and this is where we started. Outside India, the majority of the revenue comes from the US. The India percentage as of the total, even with the India market growing, is steadily coming down to about 25 to 20 percent,” added Khurma.Founded in 2013, by Manan and Jagjit Rai Khurma, Cuemath offers an after-school online math program for K-12 (kindergarten-to-class-12) students.

The company counts Alpha Wave, Lightrock India, Peak XV (formerly Sequoia Capital India), CapitalG (formerly Google Capital), Manta Ray, and Unitus among its prominent backers. In June 2022, it had raised $57 million, doubling its valuation to $407 million.

Steering towards retention

Cuemath saw its operating revenue surge 62 percent in FY21-22 from a year earlier. However, the company also reported a larger consolidated loss of Rs 217 crore as its expenses jumped 65 percent. Cuemath spent nearly Rs 128 crore on employees alone.

Soon after, the company laid off about 100 employees while Khurma returned as its full-time CEO, taking the chargeback from Vivek Sunder, who continues to work with the top management at Cuemath in an advisory capacity.

“While the redundancy exercise was prompted by certain macro conditions, it was largely driven by the shift in focus towards retention, learning and curriculum,” Khurma said.

The Cuemath founder added that the company has made a major shift in its plans compared to last year towards retention, positive unit economics, and LTV (lifetime value). Khurma says the company will be profitable in the third quarter of FY24-25.

“Our number one metric today is retention. The plans we shared with our board and cap table are now anchored more on retention, and not so much on revenue as it used to be earlier,” he added.

The company aims to achieve a retention rate of over 75 percent in the next seven to nine months with this shift in strategy. Khurma also said that the company has been optimising customer acquisition costs (CAC) over the past year.

“Our CAC is steadily going down due to better processes and more efficient customer touchpoints. More retention leads to more LTV, and that leads to a high-quality business. Our LTV to CAC numbers are pretty good,” Khurma said.

Cuemath spent close to Rs 100 crore on advertising and promotions in FY21-22, from Rs 81.5 crore a year earlier in FY20-21.

India overvalued

Like Khurma, SoftBank’s Rajeev Misra, in an interview with Moneycontrol earlier this month, said that the Indian market is “definitely” exaggerated, taking a jibe at the valuations of Indian startups that raised huge sums of money in the two Covid years by presenting a large potential market to investors.

Echoing Misra’s sentiments, Zerodha co-founder and CEO Nithin Kamath and PhonePe co-founder and CEO Sameer Nigam said that the total addressable market (TAM) for startups in India would be around 100 million. Kamath and Nigam, panellists at the Moneycontrol Startup Conclave in Bengaluru on July 7, added that investors and founders may have overestimated the size of the market.

Khurma explained that the addressable market for edtech in India varies depending on the price segment and mode of learning.

“India is a price sensitive market, even when it comes to a category like education, which is very high on a parent's priority. India is not a homogeneous market and every segment requires a different go to market (GTM) and pricing strategy,” added Khurma.

The Cuemath chief believes that the global demand for quality maths education will always hold and continue to grow. For India, going forward, Khurma said that the company plans to bring back elements of its initial offline model.

“When we started Cuemath, we actually started not with the online model, but with offline. We had teachers running neighbourhood centres out of their homes. We have brought that back, which will help get the India business back on track. For the India market, we intend to go big on offline,” Khurma said.