Upskilling edtech unicorn upGrad widened its losses nearly three times to Rs 626.6 crore in the financial year (FY) ended March 2022, compared to Rs 211.1 crore in the previous year.
The company raised $210 million in a funding round in August, led by ETS Global and Bodhi Tree, pegging its valuation at $2.25 billion.
Losses at the unicorn spiralled due to a significant rise in expenses during FY22. Total expenses grew 2.5x to Rs 1,300.6 crore versus Rs 513.8 crore in FY21.
The biggest expense for the edtech was advertising and promotion, for which the company spent Rs 424 crore in FY22, more than double of Rs 205.1 crore it spent in FY21.
On its expenses, upGrad said, “there is no such thing as reducing costs for a growth company as it's about expanding and building on revenues. ”
Employee benefit expense and cost of materials also form a major part of the company’s total expenses, accounting for about 50% of it.
Upgrad reported an employee benefit expense of Rs 383.2 in FY22, more than double of Rs 161.5 crore in FY21. It spent Rs 9.6 crore on the employee stock option plan in FY22, 26% more than FY21. Its cost of material consumed grew three-fold to Rs 259.8 crore during the year.
The company spent Rs 48.7 crore in information technology expenses and Rs 43.3 crore in legal professional fees, 3.7X of what it spent on both last year. These other expenses, which include advertising expenses, in total, accounted for 47% of the costs.
“We have pursued over 10 mergers and acquisitions and those costs have been factored into FY22. As we proceed, for the next two years we will continue to invest in our business model and overall global expansion,” it added.
The Temasek-backed startup’s operating revenues nearly doubled to Rs 679.1 crore in FY22, according to the documents it filed with the Ministry of Corporate Affairs (MCA).
“In terms of revenue, we are projecting, we look at an Annual Gross Collected Revenue of Rs 800 crore in JFM 2023 (January-February-March), thereby ending the fiscal with an ARR (annual revenue rate) of Rs 3200 crore,” upGrad's spokesperson said in a response to VCCircle’s queries.
At a time when the edtech sector is under pressure due to funding crunch and are resorting to cost cutting measures including layoffs, upGrad has raised capital, acquired companies and has plans to hire more people.
“We will continue to increase our team size substantially over the next two quarters as we grow and scale our revenue. Unlike others in the K-12 space who would have started multiple initiatives, ours was a part of the strategy to become the most integrated higher education company in the world,” upGrad said.
While the company is now operating in a blended online-offline space, it said over 85% of its revenues will come from the online business. As it goes through the process of consolidating the companies it acquired into one entity by June 2023, the company expects to improve its operating efficiency.
“This will help in creating a stronger pipeline of career development opportunities for reducing our overall customer and marketing acquisition costs, significantly,” the company said in the report.
It further added it does not have concerns or issues with profitability, considering its current revenue growth rate and margins.
In a performance report the firm filed with the MCA, the company said it aims to achieve profitability in "long business run".
