When a market leader is in blues, entire sector gets painted in the same shade: Ashwin Damera of Eruditus

Ashwin Damera, co-founder and CEO of Eruditus

When the leading player goes through a whole bunch of issues, certain investors paint the whole industry with the same brush, said Eruditus’ co-founder and CEO Ashwin Damera, in an interview with Moneycontrol, when asked about how Byju’s crisis is impacting India’s edtech space.

“If you think about investors who have been in India, who have an India team, who have been investing for five-ten years, for them, I don’t think that (issues with an industry leader) matters much because they can make that difference,” said Damera.

“But if you are an investor sitting in the US or somewhere else and you have written your first cheque for a company and if that company has a whole bunch of issues, whether those issues are real or not that’s a different point, you are not writing your next cheque in any hurry. I have personally heard investors saying 'look this person made an investment, but they won’t be making any India investments or they won’t be making any edtech investments for some time now',” Damera added.

Damera's remarks regarding the influence of the crisis at Byju's on India's edtech industry comes during a period of a significant decline in investments within the sector. The edtech space had experienced substantial growth as a result of the Covid-19 pandemic’s stay-at-home restrictions.

However, various factors such as macroeconomic challenges and the resumption of in-person education at schools, colleges, and tuition centers have contributed to the decline in funding. Furthermore, the numerous problems faced by Byju's have exacerbated the situation.

The financials

Damera was talking to Moneycontrol regarding Eruditus’ FY23 (July-June 2022-23) financial results. The SoftBank-backed higher education and upskilling unicorn, clocked $400 million (Rs 3,200 crore) in sales for the year ended June 2023 and narrowed its loss minus exceptional items to $40 million from over $66 million in the previous year. With this, Eruditus became one of the largest revenue-grossing edtech platforms globally.

While Damera too acknowledged the Covid-19 pullback, he said that the higher education and upskilling segment was the least affected because of the reopening of schools, colleges, and physical tuition centers. Last year, Moneycontrol reported how the upskilling segment had continued attracting investors' attention despite other edtech segments experiencing one of the worst funding periods.

Eruditus is also currently in talks to raise about $150 million in a mix of primary and secondary share sales as it seeks to give a partial exit to one of its early backers. Damera declined to comment on the fundraise, but according to two people aware of the development, the company has appointed investment bank Avendus as financial advisor for the fundraise.

The talks are in fairly early stages and thus there is no clarity on the company’s post-money valuation. Eruditus was marked down internally by about 9 percent by US-based Private Shares Fund for the quarter ended March 31.