Will Indian EdTech sector see a revival anytime soon?

The last two years have been tough for the Indian EdTech sector as it has faced significant losses and funding cuts. Layoffs have continued to haunt the sector. As per media reports, around 10,000 people were laid off from the EdTech segment with at least 22 companies in the sector cutting jobs.

According to the Inc42 Edtech Report 2022, Indian EdTech start-ups raised a total of $2.4 billion across 95 deals in 2022, enduring a Y-o-Y decline of 49 per cent and 42 per cent respectively.

“In the past two years, the EdTech sector has faced significant losses and funding cuts, resulting in layoffs that affected nearly 10,000 employees since 2022. Restoring the sector's strength requires a strategic reevaluation of business models that align with learners' evolving needs. The future is clearly hybrid learning. Moreover, rebuilding trust among employees is crucial for fostering a resilient team and rejuvenating the sector,” Aditya Narayan Mishra, director and CEO, CIEL HR, told THE WEEK.

He said though the sector is facing multiple challenges, there is a glimmer of hope. “With the growing internet adoption in rural areas, EdTech emerges as a powerful tool to reach and equip this audience for a competitive job market. EdTech's pivotal role lies in educating and upskilling India's youth, enabling them to thrive in the dynamic landscape of technology and diverse job roles,” added Mishra.

A few other experts with whom THE WEEK spoke to feel that the adoption of EdTech was by force during the pandemic. The huge demand resulted in unrealistic valuations for EdTech companies. “While the post-pandemic time is yet to stabilise with the hybrid of physical and online learning, e-learning will not see a dip in India in the coming years. The growth in adoption of the internet and the consequent surge in demand for EdTech will provide the much-needed impetus for growth to this sector in a more pragmatic way and the sector is here to stay for a long period. Hiccups around valuation as well as dip in earnings or non-profitability will be rationalised over the stabilisation time,” says Subramanyam Sreenivasaiah, CEO at Ascent HR.

Some market experts feel that tough times will continue for the sector and it will be a while before it gets revived. “One conclusion that can be drawn from the past five years is that building EdTech conglomerates have not brought success, on average, neither for students nor for the EdTech companies themselves. This is surprising and contrary to the overall sentiment as brick and mortar schools and colleges have generated above average returns from their education business. One reason that can be attributed to this dismal situation is that EdTech was more busy with the hardware of the business as compared to the software of imparting and testing skills,” remarked Alok Shende of Mumbai-based Ascentius Consulting.

Interestingly, EdTech major BYJU'S has been in the limelight for different reasons during this hour of crisis in the sector. The company had reportedly laid off 1,000 employees recently and skipped quarterly interest payments of around $40 million on a $1.2 billion Term Loan B (TLB), currently under litigation. The EdTech firm is also fighting a lawsuit in a Delaware court against US-based investment management firm Redwood which has proposed to take over its US entity, BYJU'S Alpha, after a default earlier this year. The latest court action follows unsuccessful negotiations with lenders to agree on new loan terms. There are also media reports that the legal battle between BYJU'S and its lenders in the US has made the other investor Davidson Kempner Capital Management concerned. Besides, in order to cement its place in the offline education space, BYJU'S will launch the Initial Public Offering (IPO) of its test preparatory arm Aakash Education Services Limited by the middle of next year. The move is expected to help in significant capital infusion in the entity.