View: There are some worrisome aspects noticeable in the post-pandemic edtech

Byju’s has denied that it has delayed payments to Aakash Educational Services, an edtech company it acquired in April 2021. ‘The acquisition process of Aakash is fully on track and all payments are expected to be completed by the agreed upon date – August 2022,’ the company told ET last week.

And, yet, there is trepidation – not just with Byju‘s, but with the edtech sector as a whole. Almost everyone – rivals, educationists, academicians and even policymakers – is quite wary of India’s largest edtech company, with a valuation of $22 billion, possibly reflecting the current condition of the whole edtech sector. But is there truly a reason for worry? Or are the red flags being hoisted based on wishful thinking of not-so-well-wishers?

But, first, there are, indeed, some worrisome aspects noticeable in the post-pandemic edtech sector.

Accusations of regular mis-selling: Byju’s fast-talking, brash sales executives often reportedly frighten parents into believing that the future of their progeny is hopelessly bleak unless they buy into Byju’s offerings. A third-party loan is dangled before parents who may seem hesitant, making the deal seem sweeter. Which parent won’t agree to a few thousand rupees to guarantee a far rosier future for their child? On this hope lies the bite.

Yet, at a macro level, there is no evidence so far to suggest that Byju’s, or any other edtech company’s, offerings are leading to any kind of improvement in learning outcomes in the K-12 space. No third-party assessment of offerings has been done. Yes, some students may go through the online coaching centre rigmarole and make it through some of this country’s absurdly competitive exams for coveted institutes. But there is little to distinguish one test prep offering from another. The brightest sparks often come through regardless of which entity coaches them – or doesn’t.

The way edtech companies might be recognising or recording revenues: These companies are selling products today that are to be delivered for the next 2-3 years or even four. The money for the sale might come in instalments over the years. However, the company in question may record its revenue on the day of sale.

But as has been the case in many cases, actual revenues might be far lower than the recorded one. Some parents may not be able to pay in due course. Others may cancel, and some money may come in only as service is provided. Since the service is provided over, say, 3 years, the money may well come in three instalments over that period.

Some edtech companies are reportedly even selling their receivables to institutions today in anticipation of future payments they expect to receive to raise money. This, if found true, is worrying for two reasons. One, the amounts raised could be higher than what eventually comes in, leaving a gap that resembles a gaping hole. Two, sector experts draw parallels with Educomp, the Gurgaon-headquartered company set up in 1994, which made similar promises and raised money against its receivables from schools, money that was never received. Schools who had bought in either lost interest, or lost confidence, in

‘s promise.

Further, to raise money or sell against an inflated receivable is both foolhardy and be considered dishonest. The institutions who buy or loan money against these receivables should be the biggest worriers, and exercise their judgement in a prudent manner.

Tricky valuation: A factor that has bothered many since Byju’s started its journey is the valuation of the business at various stages. But the edtech industry as a whole seems to be far more

about valuations. After all, if China’s Alibaba and Ant Financial can offload their full stake in Mall for ₹42 crore at a valuation of ₹100 crore in 2022 – down from a valuation of ₹21,000 crore in 2020 – anything is possible. As the Punjabi from Ludhiana would say: mainu ki?

In Byju’s’ defence, it has certainly built something quite formidable over the last 11 years. Hardly a day goes by without many edtech leaders and players musing over the company and what it has managed to build. So, if it, indeed, does get everything or even most of it right, one can only deeply admire what Byju Raveendran, the 41-year-old former teacher with no prior experience in entrepreneurship, has managed to pull off. Even as he may have some heavy lifting to do for his own company and the edtech sector in general.

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