Eruditus FY23 loss excluding exceptional items narrows to $40mn as revenue tops $400mn

Damera explained that the company earns about 80 percent of its monies abroad, while a majority of its expenses are incurred in India (at lower costs), which helps the company achieve strong gross margins of about 50-60 percent.

“Our core business, the US and Europe operations, was at an 8 percent EBIT even in this quarter (June quarter), and next year, I expect it to be 18 percent. The consolidated business will be somewhere around 7 percent,” Damera told Moneycontrol in a telephonic conversation.

“It is certainly exciting to be profitable, especially in this environment, when people are valuing profitability. We have achieved that this quarter and hope to build on it going forward,” Damera added.

The edtech is currently looking to raise approximately $150 million through a mix of primary and secondary share sales. If the narrowing losses and growth momentum are indeed accurate, it could provide a significant boost to the company’s valuation. This is particularly important as edtech valuations have dropped globally.

Damera declined to comment on the company’s fundraising plans, but according to two people aware of the matter, Eruditus has appointed investment bank Avendus as an advisor for a new fundraise, of which, about $65-70 million will be in secondary sales, and the rest will be primary. The investment bank was appointed last week, and the talks are at an early stage, with no clarity on the valuation yet. The Mint newspaper first reported the development last week. A secondary sale is one where one shareholder sells his or her share to an investor. The proceeds of a secondary sale go to the person selling.

Founded in 2010 by Chaitanya Kalipatnapu and Ashwin Damera, Eruditus offers programmes for working professionals. The company has raised a little more than $814 million in equity funding to date, and counts SoftBank, Prosus, Sequoia, the Chan Zuckerberg Initiative, GSV Ventures, among others, as its backers. In August 2021, the company raised its largest-ever round of $650 million at a valuation of more than $3.2 billion. Since then, Eruditus has not raised any equity funding.

If Eruditus manages to clock $560 million in revenue in the current financial year, the company will become one of the largest upskilling and higher education platforms globally by revenue.

“One big area of focus for us is our enterprise offering (business-to-business). It is about 10 percent of our business, but the fastest-growing segment. In the next 12 months, we expect it to grow about 70-80 percent,” Damera said.

“We also have started going deeper into the healthcare segment. We are working with the Harvard and Stanford Medical schools. The other area of focus is sustainability, diversity, and inclusion. We are starting to see good demand in Europe and the US for sustainability, not so much in India. Because we have a presence in multiple geographies, our scalability and TAM (total addressable market) is much larger,” he added.

Damera also said that Eruditus will be conservative in taking the inorganic route to growth as the company feels that the bar for M&A (mergers and acquisitions) has risen of late. This is a shift from the company’s stance last year, when it had earmarked about a billion Dollars for acquisitions.

Eruditus has already invested about $400 million in acquisitions, and had signed a term sheet with CPPIB (Canada Pension Fund Investment Board) for $350 million in acquisition financing for another acquisition of about $550 million. But the deal fell through and Eruditus did not raise the money. Instead, it raised about $100 million in debt from HSBC and Marsh in 2022.

Damera, however, said that Eruditus might look to acquire companies that thematically make sense, like those offering enterprise solutions in the US or startups offering courses in tier-2 markets and beyond in India, which will help Eruditus penetrate deeper, and even offer offline solutions. However, Damera ruled out the possibility of Eruditus going offline in the near future.

“I still believe we can build a very large business without any offline distribution in higher education,” Damera said.

“But there are certain models we have seen, where there is offline distribution in higher education, which are interesting, and so we may explore them in the future,” he added.

Eruditus, which became India’s second-biggest edtech by revenue in FY21-22, has not yet resorted to mass layoffs. However, the company let go about 40 people in June last year, Damera had told Moneycontrol then.

“We raised a large round two years back and wanted to expand. We went into Brazil, Japan, France, and so on. But in the last 12 months or so, we decided to scale back some of these experiments. We pulled back from some of these markets, and naturally the people in these markets were affected,” Damera told Moneycontrol.

“However, we have continued to invest and continued to grow the core business. We have moved many roles from the US and Europe to India. That way, while our head count remained the same, we rationalised costs,” Damera added.