Massive layoffs, business restructuring: Is India’s edtech bubble bursting?

Even top firms that closed huge funding rounds are now struggling to raise a few million
Representational Image. (File Photo)
Representational Image. (File Photo)

BENGALURU: The edtech industry, which witnessed a massive boom during Covid times, as students and parents preferred online classes, is now battling numerous challenges.

So, they are forced to lay off employees, open offline centres and restructure their businesses. Some edtech giants are offering massive discounts on their courses to attract as many students as possible.

Also with funding hard to come by, even top edtech companies that closed huge funding rounds with ease are now struggling to raise a few million-dollar rounds.

Edtech giant BYJU’S announced an $800 million funding in March this year. Of the total, the company is yet to receive nearly $250 million from its two investors.

BYJU’S spokesperson attributed the delay to macroeconomic reasons. Do these signs indicate that the country’s education technology bubble is about to burst?

Aggressive selling comes a cropper

“In the first place, the context in which the edtech companies grew has changed with children going back to physical classrooms. However, the problem for edtech companies is much beyond the context change. The parents who had tried the service in Covid times are not renewing, primarily because they haven’t seen a positive impact on their kids,” said Ganesh Mahadevan, Partner - Thinksynq solutions.

Mahadevan, who is a mentor to several start-ups, said the whole process of sourcing customers, selling the right expectations and ensuring delivery has been short-charged with aggressive mis-selling.

Due to this, the parents are deserting the edtech companies in droves leading to business downsizing and cash flow challenges resulting in delayed refunds.

As he pointed out, many edtech companies are into mis-selling courses. A news agency citing sources recently reported that the Ministry of Consumer Affairs pulled up edtech firms for aggressive mis-selling of courses to parents.

Immediately, Indian Edtech Consortium (IEC) under the aegis of the Internet and Mobile Association of India (IAMAI) issued clarification around mis-selling and misleading advertisements by these companies.

IEC said it has created a two-tier grievance redressal mechanism that has been actively resolving consumers’ complaints.

According to the Advertising Standards Council of India (ASCI), which resolves issues in advertisements, education remains the single largest violative sector, followed by healthcare and personal care.

ASCI ‘Complaints Insights 2021-22’ data shows about 33% of complaints are filed against the education sector. Edtech companies promote their courses by offering deep discounts.

In some edtech companies, teachers also act as sales representatives as they are even offered cash incentives as high as Rs 5,000 if a student they referred to, takes 5th class with the edtech company.“If a student wants to pursue a course, they are given trials. If the student is satisfied with the trial, parents enroll them in regular classes. For instance, of the 10 trials, if 3-5 are converted into regular classes, a teacher receives money accordingly,” said a teacher with an edtech giant.At the same time, these teachers have to fulfill certain metrics. “Switching on the camera during classes is mandatory and we need to encourage students by making use of ‘claps’ ‘Hats off’ and other icon images. We need to keep classes very interactive and have to be punctual too,” said the teacher. Also, if teachers are not punctual, after three warnings, some edtech firms even fire them immediately.

From online to offline

From India’s most-valued edtech unicorn to emerging edtech companies, all have started offline centres. BYJU’S, Unacademy, Vedantu and Physicswallah have opened many offline tuition centres to attract more students. People have realised the importance of face-to-face interaction for higher engagement levels and motivation, said Ranjita Raman, CEO, Jaro Education.Many edtech companies were started during pandemic times, and these companies started focusing only on growth without looking at stability. The edtech sector has realised that 360-degree attention is required in the business. This realisation has led to layoffs and restructuring. The fundings are phase-based funding, which is target and revenue driven.The approach that edtech took by focusing on only scaling the business and not looking at profitability has led to a significant dent in revenue structure, causing a delay in the various funding rounds, Raman said.

“Companies have started taking thoughtful steps in marketing spending. The marketing budget was reduced from 11.6% in 2019 to 8% in 2021 of the total revenue,” Raman added.Edtech firms charge anywhere between Rs 3,000 and Rs 35,000, depending on number of classes and syllabus. For NEET and JEE, it’s Rs 1 lakh upwards. Also, many are focusing on the hybrid model.Last month, Unacademy announced the launch of its first two offline learning centres in Kota, Rajasthan. The Unacademy Centres will facilitate the offline classes for learners and will extend access to top educators in the NEET-UG, IT JEE, and Foundation (9-10) course categories, it said.

It aims to enroll up to 15,000 learners in the first batch across all the upcoming Unacademy Centres in the 9 cities -Kota, Jaipur, Ahmedabad, Chandigarh, Patna, Pune, Bengaluru, Delhi, and Lucknow. The company has onboarded over 30 top educators for its Kota centres. Kota is now buzzing with poaching of teachers, as many edtech companies have started offline centres in the city.With multi-functional café, a massive library, doubt solving zones along with several classrooms and functional zones, Unacademy Centres cater everything to attract more students.

Edtech companies must transparently make their customers aware of all financial arrangements. They should adopt a self-regulatory code and practice the same, said Rameesh Kailasam, CEO, IndiaTech.
“The sector needs to communicate clearly and ensure that students are not falsely misled. More transparency and clarity are required from edtech in terms of accountability. While growth in business is undeniably critical, it is also of paramount importance to allow consumers to make more informed choices and decisions while being protected,” he added.

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