At times a year feels Like an eon! The past year certainly packed a generation in itespecially for EdTech. Before I delve into the business side of things I hope and praythat each one of you reading this message is safe and secure and managed to make itthrough these trying times unscathed. In the CL Educate family we did witness the worstof COVID; and I convey our collective condolences to those of us who Lost their Loved onesto the pandemic. It also fills me with pride when I reflect upon the efforts from one andall.
As an organization we have been operating completely remotely. Our teams acrossbusiness units have done a tremendous job over the last 16-18 months. My congratulationsto them for seeing us through this difficult phase. Predictably given the nature of ourbusiness there has been a dip in revenues; and we have also undertaken certainCOVID-induced non-cash write- offs/provisions to ensure that the reality on the groundalso reflects in our financials. Our business EBITDA cash position and EBITDA marginscontinue to be strong; and the significant shifts we have made over the last yearinterms of being a digital-first organizationare certain to hold us in good stead forthe long term.
In the overall economy there were several EdTech- significant actions including thehighest private equity infusion of US$ 5 billion. On the other hand COVID-19 played havocwith the education calendar and the lives of all the stakeholders in education. Thedisruption on the MarTech side of our B2B business was total. It was scary and excitingat once! Interestingly opportunities are the greatest where the disruption is maximum.
With that as the backdrop I would like to focus on some key themes that are relevantto know and understand as we move into the future.
Theme 1: Emergence of 4-5 EdTech players in the next few years
One of the key points that has been proven Last year is that the EdTech domain can bewide with tremendous depth and is hugely scalable. This was an insurmountable perception(or belief) barrier for most during the Last decade or two. I foresee 4-5 Largeprofitable and listed EdTech stories playing out in the next 3-5 years. If you arelooking for analogies I would point you to the way IT services have emerged in the pasttwo decades. Education will be no different! I also believe that some of the Largeindustrial houses will make a strategic entry into education by focusing on asset-lighttechnology-driven products & services model. The Tatas Reliance HCL Wipro arealready invested here in some shape or form as you are aware.
CL Educate has a headstart; and is arguably the only listed EdTech currently. We havegreat promise ahead of us; and are focused on making this opportunity of India goingglobal count over the next decade.
Theme 2: Policy reforms from NEP 2020 have hit the ground running
The National Education Policy (NEP) 2020 approved by the Parliament has finally hitthe ground. The number of policy initiatives translating into new institutions coursesand exams is quite exciting if not mind blowing! We often miss these invisible eventsthat could signify a tectonic shift. Just a few samples or examples for you:
Creation of the NTA to become the singular testing agency; and her gatheringmomentum over the past 12-18 months is a great sign for Indian education.
Introduction of CUCET for entry into the 54 Central Universities and selectprivate universities (top 100) is likely to emerge as the single-largest educationalreform in India since 1947. It could involve more than 100 lakh exam takers a numbersimilar to that of Gaokao (China's annual national college-entrance examination).
Launch of undergraduate sciences liberal arts courses by the top institutionsincluding the IITs IIMS.and NLUs.
Theme 3; Freedom and fuel for growth - Career Launcher and Kestone
In the Last 18 months CL has transformed from a predominantly brick-and-mortareducation company to a digital-first omni-channel EdTech Player with product offeringscovering almost the entire spectrum of the student population aged between 14 & 27years. With cutting-edge technology we are pivoting from a services alone company towardsbecoming a EdTech product company in the next 3 years. Over the upcoming 3-5 years we seean additional investment of US$ 10 million in creating a wide variety of products to winover various course streams. Our endeavor is that in 5 years' time at least 33% of ourtotal revenues should be product based; thus making it hugely scalable. Premium teaching& mentoring services built on top of these scalable products will continue tocontribute the bulk of the remaining revenues. We also foresee additional investments ofUS$ 30-50 million through a mix of accruals and external sources so as to emerge as aserious EdTech Leader during this period.
In the Last 18 months the Virtual Events platform developed with cutting-edgetechnology by Kestone has been adopted and accepted by some of the global IT and Techcompanies. We are now in the process of ramping up our platform product sales not only inIndia but also in North America Europe and Asia-Pacific.
Interestingly close to 60% of the revenue of the product came from internationalmarkets. Over the next 24 months we will continue to invest in new product creations. Twonew products are likely to be put out in the market in the next 3 quarters. First the DIYversion of the events platform; and then the Seminar/Webinar version of the platform.Both these products would be best in their class globally; and will be priced at close to50% of similar-priced product offerings not only in India but also globally. We expectthat the investments into new products to be over US $5 million which would enable theseproducts to be of global scale.
Both Career Launcher and Kestone have done remarkably well during the COVID-19 crisis;and have pivoted exceptionally well to enter the digital-first world that is likely toprevail in the post-pandemic era. Both these businesses have their own direction to lookat their own aspirations to fulfil with great operating Leadership teams; and I am sureof a future of success as well as wealth creation for the employees and shareholdersalike.
We over the past year have undertaken clear steps to convert this potential into asuccess story in the coming quarters. Board- and shareholder-approved ESOPs have begun tobe rolled out for the team; as well as a fundraiser initiative from private equity intothe digital subsidiaries of these businesses. I believe we are entering a very excitingplace that could alter the orbit of the organization and our businesses in the next coupleof years.
Theme 4: Shareholders' partnership
As an organization we have always tried to maintain a 360-degree perspective vis-a-visall stakeholders including students parents educationists governments and finallyyouthe shareholder. Our efforts and focus will continue to make CL a meaningful partof your personal portfolio; and also make you a partner in our journey to impact societyyouth and education while generating wealth.
We are creating an engagement program for our shareholders to participate in thejourney of CL details of which will be shortly available in the Investor Zone section ofour website.
Satya Narayanan R
Founder and Chairman CL Educate