 "LEAD Group to seek PE funding after hitting profitability milestone")
Ed-tech unicorn LEAD Group is optimistic about achieving positive earnings before interest, tax, depreciation, and amortisation (Ebitda) by the end of the current financial year (FY25) in March as spending on education rises, its co-founder and CEO Sumeet Mehta said.
Mehta indicated that the company might seek additional funding once it establishes a consistent profit record.
“We are continuously enhancing our profitability, targeting an Ebitda margin of 25 per cent as we stabilise,” Mehta told Business Standard in an interview.
The ongoing financial year would mark the company's first profitable year, following a $100 million investment from venture capital firms WestBridge Capital and GSV Ventures, which valued the company at over $1.1 billion in 2022.
On the recent decline of edtech firm Byju's, which saw its valuation plummet from $22 billion to zero in three years, Mehta reflected on the pandemic’s impact on investor focus. “During the Covid-19 pandemic, the spotlight was on online education and B2C opportunities. In retrospect, we see it was a short-lived trend. After the pandemic, many ed-tech valuations fell as businesses adjusted back to normal,” he said.
“Unfortunately, this has caused some investors to generalise and hesitate to invest in the sector until the memory of those losses fades. However, we are engaging with investors who can differentiate between various ed-tech models,” he noted.
The Indian ed-tech landscape includes online tuition, school ed-tech (LEAD Group's focus), and upskilling, each with distinct characteristics.
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“We are connecting with investors who recognise this distinction and understand the long-term potential of school ed-tech and upskilling,” Mehta said.
Founded in 2012 by Mehta and Smita Deorah, LEAD Group aims to aid school education in India by integrating a well-researched curriculum and pedagogy with technology, in line with the National Education Policy.
“We are currently concentrating on profitable growth. When we approach investors again, we expect to receive fair evaluations based on market conditions. I’m not fixated on valuation; my priority is expanding our reach to more schools and students,” Mehta said.
India currently has around 120 million students enrolled in private schools, which is projected to rise to 200 million by 2030, he said.
Currently, parents spend between Rs18,000 and Rs20,000 per student each year on K-12 education, contributing to a total expenditure of approximately Rs2.15 trillion. This figure is expected to grow to about Rs5 trillion by 2030.
“Our goal is to enhance this spending by 10-12 per cent to improve learning outcomes significantly. Many parents' expenditures are not translating into effective learning, as reports indicate that Indian students often struggle with employability. We need to focus on making that investment yield better educational results, and that’s the challenge we’re aiming to address,” he said.
Mehta explained that for parents, its product involves minimal additional costs as it serves as a replacement solution that also empowers teachers. “Parents typically pay for textbooks, smart classes, and other school investments. Our integrated system replaces all of these, allowing schools to operate more efficiently,” he said.
Mehta explained that if a parent spends Rs25,000 a year with about 15 per cent of that going towards textbooks and smart class resources, its system effectively replaces that expenditure.
“Our integrated solution provides significantly better outcomes because it consolidates everything a teacher needs in one place. The lesson plans and content are of higher quality, making it much more effective,” he said, adding that the company’s approach enhances both teacher and school performance, ultimately leading to improved student learning.