Akansha Deshmukh

With increased internet penetration and the imposition of lockdown measures, the ed-tech sector witnessed a meteoric rise. Notably, not only students but also working professionals turned to online courses to enhance their skills and knowledge.

According to a report by EBEF, this industry is projected to reach a staggering USD 4 billion by 2025, showcasing a robust compound annual growth rate (CAGR) of 39.77%.

Indian Ed-Tech startups secured over USD $1.43 billion in funding during 2020, with BYJU’S leading the pack by raising 57% of the total capital, followed by Unacademy (10.5%) and Vedantu (9.5%).

Several companies even achieved the coveted ‘unicorn’ status, signifying their valuation surpassing $1 billion. However, despite these promising figures, concerns persist within the ed-tech sector, highlighting the need for greater scrutiny.

Amidst the positive growth numbers, there are troubling aspects within the ed-tech sector. Reports have surfaced regarding the working conditions in these companies and their client acquisition practices, particularly when targeting school-going children. Education has become a profit-driven enterprise, demanding the government’s intervention to encourage self-regulation.

Controversies

Recent controversies surrounding prominent ed-tech giants have amplified doubts about the industry’s ethical practices.

Deceptive advertising, manipulative tactics, incessant solicitation and data misuse merely scratch the surface of the problems plaguing the sector. Furthermore, leaked audio recordings have shed light on the questionable working conditions for salespeople in some of these companies.

In today’s social media era, concealing such practices has become increasingly challenging. Consequently, the ed-tech industry must proactively strive to reshape its tarnished image.

Given the importance of a good education in India, it becomes even more critical to prevent the common man from falling prey to exploitative practices under the guise of education.

PhysicsWallah’s Evolution: Struggles with Teacher Attrition and Funding Drive EdTech Giant’s Next Chapter

PhysicsWallah (PW), led by Alakh Pandey, initially aimed to differentiate itself by adopting a different product strategy to BYJU’S or Unacademy’s. However, over the past year, PW has become more similar to its competitors.

Despite its profitability in FY21 and FY22, PW is now seeking another round of fundraising, due to challenges such as attrition of star teachers and an increase in student refunds.

PW is also facing the risk of relying too heavily on Mr Pandey’s brand power, especially for newer courses, where he has little involvement as an educator. The company is in talks to raise USD 250 million or more, which would significantly increase its valuation, but future growth largely depends on funding.

PW has expanded its offerings beyond IIT-JEE and NEET test preparation to include courses such as UPSC, MBA prep, GATE prep, and K-12.

This expansion has resulted in increased expenses, particularly for employee benefits, as well as higher prices for certain courses.

The company will need to invest in ensuring consistency among teachers across India and in marketing its courses effectively.

The relationship between PW and its teachers has experienced strains, with some star teachers leaving for rival companies. The recent months have been tumultuous for PW, and teacher retention and maintaining a positive culture will be crucial for its success.

BYJU’S Faces Mounting Losses, Controversies, and Liquidity Crisis Amidst Financial Struggles

BYJU’S, the multinational unicorn in the space, has reported a significant loss of INR 4,588 crore in the financial year 2020-21, 15 times higher than the previous year.

Despite its rapid growth and valuation of USD 22 billion, BYJU’S faced financial constraints due to its aggressive acquisition strategy, especially during the pandemic.

However, with the shift back to offline education and a drying up of investments, BYJU’S found itself facing a liquidity crisis. 

Furthermore, reports allege the company resorted to fraudulent practices, targeting lower and middle-class parents and leaving them in deep debt. 

BYJU’s is also considering the possibility of shutting down its coding platform, WhiteHat Jr, in an effort to reduce expenses. 

The company spent approximately USD 14 million per month on the platform, which contributed to BYJU’S total loss of INR 1,118.25 crore in the financial year 2021. 

Despite closure talks, BYJU’S said it currently has no plans to shut down WhiteHat Jr, but rather aims to optimise it for organic and efficient growth. 

As part of cost-cutting initiatives, BYJU’S recently laid off 2,500 employees and is seeking additional funding of over $500 million from investors to address potential debt concerns.

The company was dealt a significant blow when the Enforcement Directorate (ED) conducted searches at the residence of CEO Byju Raveendran and the company’s offices in Bengaluru over alleged violations of the Foreign Exchange Management Act (FEMA). 

It was later found that Byju’s Think & Learn Pvt Ltd, the parent company, attracted foreign direct investment (FDI) of approximately INR 28,000 crore between 2011 and 2023, according to a PTI report.

The National Commission for Protection of Child Rights (NCPCR) also summoned Mr Raveendran in response to allegations of malpractices and deceptive tactics.

The NCPCR looked into allegations that the company targeted parents from lower-income groups, pressuring them into taking loans for purchasing the courses. 

Allegations of ill-treatment of staff and aggressive sales tactics have also surfaced, which the company strongly denies.

Financial challenges have further eroded investor confidence. The company came under pressure from lenders to make immediate part payments of a USD 1.2 billion loan after breaching certain terms.

Layoffs of 2,500 employees, coinciding with the signing of football star Lionel Messi as global brand ambassador, also raised questions about the company’s priorities.

Despite its recent sponsorship of the FIFA World Cup 2022 in Qatar, the company continues to confront a multitude of challenges.

Regulating the Ed-Tech Industry: Advocating for Complaint Platforms, Data Protection Laws, and Ethical Overhauling

To regulate the Ed-Tech industry effectively, a platform should be established for students and parents to lodge complaints about the quality of education offered by ed-tech companies. 

Additionally, the government can devise a system for grievance redressal, including imposing penalties on companies found to be violating regulations. 

Introducing data protection laws that govern the collection, storage, and usage of personal data, such as the General Data Protection Regulation (GDPR) in the European Union, can be a solution.

Given the substantial growth potential, profits, and scalability projections for the ed-tech industry, ethical overhauling must be prioritised.

Akansha Deshmukh is an independent investigative journalist covering serious crime, cyberspace, terrorism and political corruption.

Views are personal.