"We Are Only Looking at an IPO in the Next 15-18 Months"

In just a decade, Byju Raveendran, Co-founder of Byju’s, has turned a fledgling math tutorial outfit into the world’s largest ed-tech venture and India’s biggest unicorn, valued at $16.5 billion. Not the one to rest on his laurels, this sport fanatic upped his game during the pandemic, raising and spending billions of dollars in a flurry of acquisitions that has put Byju’s on track to become a highly profitable, $5-billion revenue company by 2023-2024. This could make it one of India’s five most valuable companies, and him one of the country’s richest business founders. Raveendran talks to BT’s Global Business Editor Udayan Mukherjee about Byju’s explosive growth, the future of ed-tech, and more. Edited excerpts:

UM: You started Byju’s barely a decade ago, and it is already valued more than some of India’s oldest and biggest companies such as IndianOil or Bajaj Auto. Did you ever imagine that Byju’s would become so big in such a short span of time?

BR: To be honest, I didn’t start Byju’s as a business. I was only following my passion. Slowly, it moved from a class of 30 students to auditoriums, then stadiums and, finally, to millions of smartphones. I am still in pursuit of how to make it better and bigger.

UM: From a tutorial teacher to grappling with deals running into hundreds of millions of dollars…do these valuations strike you as a bit of a bubble?

BR: I think it is very early days for our sector and what technology can do for it. This is one of the last sectors technology is going to disrupt. It took a pandemic for a lot of people to realise the benefits of online education. There are many things which can be done better online, though there are areas where offline is better.

You may become the most valuable ed-tech company in the world, but unless you match that with value creation, the valuation will remain just a number. We have been student-centric from the start and if you ask me our motto in one sentence — it’s making every student on our platform an active learner. We need students who want to learn. In a country used to spoon-feeding and learning driven by fear of exams and not love of learning, we have been able to create this small but fast-growing category of active students. Twenty-first century illiterates are not people who can’t read and write, but those who cannot learn, unlearn and relearn. So, you can say we are the largest in the world, but it’s a relative success. There is a long way to go before I can call it a true success story.

UM: But education is a sector that requires physical presence — the classroom, the student-teacher equation. Can online replace the experience and benefits of classroom learning? It may have worked in 2020 and 2021 because of the pandemic, but once that fades, will the role of online education start to diminish?

BR: A lot of these segments were moving online anyway. Things just got accelerated because of the pandemic. A lot of students and teachers tried out these digital tools for the first time. In the first four years of our app launch, from 2015 to 2020, we got 45 million free users to try out Byju’s platforms, and in the subsequent 15 months of the pandemic, we added 60 million users. By no means am I suggesting that we will replace schools and colleges, but there are a lot of things that are better online — like access to star teachers and high quality content. Most of learning at home, which is the segment we are disrupting seriously, will remain online even post the pandemic. It will never be 100 per cent online or offline. It will be a hybrid model. Complex subjects like maths and science can be taught much better online. Sure, schools are here to stay, because how else do you teach life skills, or empathy? There are many things you can learn only in a group, like social skills.

UM: If you are correct and online education grows and becomes an integral part of school education, could the government intervene at some point with regulations, maybe even restrict the profit you are allowed to make? I ask this as, recently, China changed the rules overnight, preventing online education companies from making profit or even accessing private capital for growth. Could that happen in India?

BR: India is not China. Regulations are never a challenge. All evolving sectors need regulations. Just don’t make a set of rules today and change it the next day. After the clampdown on Chinese ed-tech startups, more ed-tech unicorns have been created in India. A lot more global capital is chasing us now. I believe this is going to be an opportunity for us. Access to capital was a challenge for all of us five years ago, but that is no longer the case. Earlier, I would have said that India and China will together define how students learn globally, but now I feel the Indian companies have the bigger opportunity.

UM: But access to capital is not your problem, right? You have raised $660 million this year already. Is more in the offing? Are you even considering an IPO?

BR: There’s a unicorn coming up in India every other week. For education as a segment, it was a big challenge in the early days because most early investors lost money in the sector. It has been a grossly under-invested sector but now things are easier because we have been able to demonstrate growth year after year. We have been growing at 100 per cent year-on-year and now our growth is getting accelerated on a higher base. This year, we will grow much more than 100 per cent. If you have ambition, skill, and access to capital, the perfect trifecta, nothing can stop you.

UM: Is an IPO on the cards in 2021?

BR: An IPO is very much on the cards, but not in 2021. Every other day, bankers are contacting me, but we are only looking at it in the next 15-18 months.

UM: Tell us a bit about your business model. You now have three distinct businesses — a brick-and-mortar test prep model through the billion-dollar acquisition of Aakash, an upskilling business through the recently acquired Great Learning, and then your core business of school education. How profitable is each of these?

BR: All these acquisitions will add to my revenues only next year, but in our core business, we had 17 per cent margins last year. It will remain the biggest part of our business over the next several years because there is no slowdown here and the mid-term impact of the pandemic is huge. In the test prep segment, we have made a strong entry with Aakash, which we hope to scale up at a 50-60 per cent CAGR over the next three-four years; that’s another billion-dollar revenue opportunity in three years. Then there is the Great Learning segment, the professional or higher skilling segment, which is also a huge opportunity with 400 million knowledge workers. And that’s an online-first segment with professionals who will find it tough to get an offline upskilling option. The fourth is the international opportunity. In terms of profitability, three out of the four are profitable. Aakash has always been profitable, as has Byju’s core model. We can make new acquisitions more efficient and have them grow faster. We plan to invest $150 million on marketing for this. These are inherently high-margin models.

UM: Let’s put some numbers to this. As you end 2021, if you add all these acquisitions to your core business, what kind of revenues are we talking about?

BR: Let me under-promise and over-deliver. We will easily do Rs 10,000 crore revenue this year.

UM: That’s organic plus the new acquisitions?

BR: The interesting thing is that each of our three new US products will churn out over $100 million of sales, making it a $350 million run rate. It’s not very often that we are able to take products from India to the world. This makes me very happy.

UM: And on this Rs 10,000 crore top line, what would your profits be?

BR: They should be between Rs 2,000- and Rs 2,300 crore, a margin of 20-23 per cent, even after investing in all these new businesses.

UM: At what rate do you expect the Rs 10,000 crore revenue line to grow over the next two-three years?

BR: Our core India business growth will slow down to 75 per cent next year, but with these acquisitions, we will still grow at over 100 per cent over the next two-three years because Byju’s is moving very fast in the US and will hit a billion-dollar revenue there in this time frame.

UM: Is it conceivable that in 2023, two years from now, Byju’s could be a Rs 30,000 crore brand?

BR: Yes, over the next three-four years, we are looking at $5-6 billion revenues. By 2023-2024, we should be there.

UM: Going by your margin guidance, you should have a billion dollars of clean profit by then. Is it achievable?

BR: Since our retention rate is as high as 80 per cent, every passing year, we will become more and more profitable. So, in a steady state, we will have 35-40 per cent margins in our core model, and 25-30 per cent in Aakash, so a blended profit margin of 30 per cent is easily possible. So, if we get a $5 billion revenue line, we will have $1.5 billion in profits, conservatively.

UM: Impressive, but these are ultimately only numbers. What is more remarkable is your journey, from growing up in a small village to becoming a billionaire at 40. Tell us more about it.

BR: I attribute this to the time I spent outside classrooms. My parents and teachers gave me complete freedom and I learnt a lot of life skills. I played multiple games at university level. What you learn there is very useful. When you play games for fun, and you do business for fun, you can keep doing it for years, even decades. While over the next 15 months, doing a large IPO is a very big ambition, it will only be a beginning. It will hopefully motivate many more people to become entrepreneurs.

UM: Who is the business person you admire the most? Who do you consider a role model?

BR: I have many role models, but they are mainly from the world of sports. For example, people like Roger Federer or Lionel Messi, who have continued improving even in their late thirties. I have also learnt a lot from other entrepreneurs, some of whom are investors in my business today. The most important conviction I have carried from my village days is that all people are equal and that has really stood me in good stead through good times and bad.

UM: Speaking of sports, you are a keen sportsman yourself. When you watch all these players today, athletes winning medals, do you feel a twinge of regret that you had to let it go to pursue this dream?

BR: I do not normally reflect on the past, though you may not believe me when I say I never have regrets. I have played games for fun, and done maths for fun too. Between the two, there is no reason to regret my choice. I strongly believe that you cannot improve things you cannot measure. That’s what maths teaches you. Maths and sports, these are my two real strengths, and I have capitalised on them. Thankfully, it has turned out okay.