MC Interview | $200 mn ARR is when we shall look to float an IPO, says Vedantu co-founder Vamsi Krishna

Vamsi Krishna, CEO and Co-founder of Vedantu.

Vamsi Krishna, co-founder and chief executive of edtech unicorn Vedantu says his firm grew more than 8X in terms of revenue in past two years. In an Interview with Moneycontrol, Krishna, said the company is targeting a $200 million ARR (annual recurring revenue) within next 18 months, and that’s when Vedantu will look to float an IPO.

He said, the company will be happy to achieve a 25 percent margin by then, and the edtech will continue to invest more for market penetration.

Krishna, clarified that while hybrid model has a future potential, Vedantu is not immediately going for opening physical centres, or offer hybrid education.

He said while in last two years, his firm and the edtech sector saw some hyper growth (10X to 12X), this will taper to a good growth phase (4X to 5X) this year. Edited excerpts:

Is Vedantu set to open physical centres like few other peers?

As of now, we are not doing hybrid; no plans of it. What we spoke is a future potential.

When will Vendantu do it exhaustively and formally?

Unfortunately, we don’t have a timeline. It’s a long way before we seriously attempt it. Me and the other co-founders believe that there are possibilities of innovation in those models, and I believe some great models can come out of it.

What is the growth chart of Vedantu for the for next two to three years?

The immediate target, we have taken, and we should reach there is in about 18 months. We are targeting a $200 million ARR. That’s a zone, where we can think of getting listed, it’s a zone for potential IPO. Had it been last year, it would have happened in 12 months’ time.

Many sectors including ours that got a good traction in past two years, will shift from a hyper growth stage to growth stage. From almost a 10-12x kind of growth to around 4X to 5X kind of growth is what I am foreseeing.

From the numbers you are speaking, will be it safe to say you are at a $40mn to $50mn ARR now?

I cannot share the exact numbers, but it’s much more than that. I think last June-July-August-- we were probably at that level. Now we are much higher.

How was the past year from revenue point of view?

It was very good. Obviously the year before was even crazy. In past two years (April 2020-March 2022), we grew between 8X to 12x depending on which number one talks about.

Our paid students base grew by almost 11.5X to 12X in the same time frame. In terms of revenue, we grew almost 4 to 4.5X in the first year and doubled last fiscal (which means, it is over 8X growth in 2 years).

Before IPO, you mentioned an 18 month timeline and $200 million ARR. Are you also looking to become profitable before that?

Why $200mn – because we believe it’s a good number to target. It won’t stop there; it will only grow. Inherent to this is profit profile. I told you that last fiscal we grew 2X, but our profitability must have grown 3X during the same period. When we are targeting the number, we are contemplating whether it will lead to 25% margin or 30% margin. Anywhere above 25%, we shall be super happy.

Since 95% of the market is yet to be penetrated, and (we are expanding) …these need a lot of investment. As a CEO, I am not really (worried), as long as we have investment budgets. Our investments will continue. If that puts us in ebidta negative, then be it. We are making calculated investments.  Yes, all businesses are running on a profitable mode and cash generation is important. We believe that investments are important for market penetration.

What has changed for Vedantu after turning a Unicorn ?

Nothing for us, to be honest. May be something for potential employees and for attracting good candidates because people relate with the term. But honestly, for me and our co-founders, these are just numbers, and more than numbers, they are consequences. When Vedantu had around $22mn valuation two and half to three years back, we are and used to operate like this too.