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SoftBank-backed Unacademy cuts monthly burn down to a fourth, eyes breakeven by January

Unacademy has slashed its monthly burn to Rs 50-60 crore from more than Rs 200 crore previously, sources said requesting anonymity. This has come on the back of various measures that it undertook as funding slowed down and investors turned cautious.

September 26, 2022 / 08:25 AM IST

SoftBank-backed edtech unicorn Unacademy has managed to cut its monthly costs to a fourth and is inching towards profitability by early next year, sources familiar with the development told Moneycontrol.

Unacademy has slashed its monthly burn to Rs 50-60 crore from more than Rs 200 crore previously, sources said requesting anonymity. This has come on the back of various measures that it undertook as funding slowed down and investors turned cautious. It let go of hundreds of people, brought down its digital marketing spends, and undertook other cost-cutting measures within the organisation.

“Massive efficiencies overall and this has happened without having any impact on revenue,” one of the sources cited above said.

“Overall group revenue is already up a little more than 10 percent for CY22 (calendar year 2022), and the company expects its revenue to grow 15 percent by the end of this year (calendar year). Growth has slowed compared to last year, but there’s growth still for the company,” the person added.

According to internal projections accessed by Moneycontrol, for FY22 (2021-22), Unacademy expects its accrued revenue to top Rs 700 crore, while the collection revenue for FY22 was over Rs 1,100 crore. The source added that Unacademy expects to reach break even by January.

Unacademy did not immediately respond to a questionnaire sent by Moneycontrol.

 

In July, Unacademy’s co-founder and CEO (chief executive officer) Gaurav Munjal had tweeted that the company reduced its performance marketing spends from Rs 18 crore per month to Rs 2 crore, adding that this did not impact the company’s growth.

Munjal had also tweeted that Unacademy would stop spending on IPL advertisements from next year. For 2020, 2021 and 2022 IPL seasons, Unacademy was the sponsor of ‘cracking sixes’ segment. The segment awards Rs 1 lakh to a player who hits the maximum number of sixes every match, and the player with the maximum number of sixes for the season was awarded Rs 10 lakh.

To be sure, Unacademy spent Rs 411.3 crore on advertising and marketing in FY21, up from Rs 113.4 crore in FY20. The company’s revenue for FY21 had grown to Rs 464.5 crore from Rs 103.2 crore in FY20. However, its loss also widened nearly six-fold to Rs 1,537.4 crore, according to the company’s regulatory filings with the ROC. (Ministry of Corporate Affairs).

In July, Munjal told employees in an internal communication, that it would undertake pay cuts for founders and management, place travel restrictions on employees and stop complimentary meals and snacks at its offices.

He further said that the company had new goals of being ‘cash flow positive’ and achieving profitability and advised his employees to embrace ‘frugality.’

In another internal email in July, Munjal had told employees that the company would not exercise any further layoffs and would rather shuffle ‘redundant’ employees within teams to focus on increasing cost efficiencies.

However, in August, Unacademy suspended contracts of some of its doubt-solving educators for six months, in a cost-cutting move, Moneycontrol had reported exclusively. In the same month, the edtech unicorn also halved its Relevel team to 700 employees.

Unacademy’s move to aggressively slash expenses comes at a time when the edtech sector is going through challenging times, with schools, colleges and physical tuition centers reopening. Moreover, profitability has been in focus for edtech companies as almost all edtech companies saw their losses swelling over the past two years even as their revenue surged manifold. Earlier this month, Byju's, the world's most-valued edtech firm reported a loss of Rs 4,558 crore, the biggest for an Indian startup.

Edtech companies have thus undertaken various cost-cutting initiatives like Unacademy, including layoffs. However, these startups have also pivoted to opening offline tuition centers to cash in on the rising demand for offline education.

Edtech companies are also spending aggressively on offline forays. Byju’s, the world’s most-valued edtech startup, had said in February that it will be spending Rs 200 crore on offline forays. Unacademy, meanwhile, spent Rs 100 crore on hiring 30 educators at its offline tuition center in Kota, Moneycontrol had reported.
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Nikhil Patwardhan
Chandra R Srikanth is Editor- Tech, Startups, and New Economy