In FY22, Unacademy’s losses nearly doubled to Rs 2,848 crore as ESOP costs increased
Unacademy, on the other hand, recorded an increase in operating income of more than 80%, from Rs 398 crore to Rs 719 crore. In FY22, its overall income increased by Rs 845 crore from Rs 464 crore due to a 2X increase in other revenue of Rs 125 crore.
SoftBank-backed Another firm reporting increasing losses owing to excessive ESOP costs was Unacademy in FY22 (2021–2022), primarily due to 25X increases in ESOP expenditures.
A document provided by Unacademy shows that Unacademy reported a net loss of Rs 2,848 crore in FY22, down from Rs 1,537 crore in FY21. The company’s non-cash ESOP expenditures increased throughout the period, rising to Rs 1,235 crore from Rs 481. From Rs 2,030 crore a year earlier, Unacademy’s total costs increased to Rs 3,703 crore in FY22. 33 percent of the entire costs incurred by the business were for its ESOP.
Despite this, Unacademy increased its operating profit by over 80% to Rs 719 crore in the last financial year, compared to Rs 398 crore in the year prior. In FY22, overall revenue increased by 2X to Rs 845 crore from Rs 464 crore the previous year due to a 2X increase in other income.
A loss of Rs 2,742 crore (earnings before income, tax, depreciation, and amortization) was reported by the edtech unicorn for FY22 against Rs 1,488 crore the last year. A loss of Rs 1,471 crore was reported for FY22 versus Rs 984 crore for FY21 (after ESOP costs and impairment charges).
In the period under review, Unacademy’s employee benefit costs, including those related to employee stock ownership plans, increased to Rs 1,772 crore compared with Rs 749 crore a year earlier. Compared to Byjus, which was criticized for weak internal financial controls, the auditors have unmodified their opinion on its FY22 financials.
Unacademy has now been added to the list of companies reporting growing losses as a result of hefty ESOP payouts. A 42 crore rupee operational loss for FY22 was announced last month by business-to-business (B2B) manufacturing services marketplace Zetwerk. If non-cash ESOP expenditures were taken into account, the company’s EBITDA for the year would have been Rs 57 crore.
According to the latest financial report released this week by Walmart-backed PhonePe, the company lost Rs 671 crore in FY22 after accounting for non-cash ESOP expenses. PhonePe is now in talks to raise $12 billion for a new round. In FY21, the firm recorded a net loss of Rs 1,727.9 crore (including ESOP charges), however, FY21’s net loss without ESOP costs was Rs 789 crore. As a result, the company’s net loss for the year may be greater. The firms have not yet submitted their findings to the Ministry of Corporate Affairs, and neither unicorn’s precise statistics have been made public (MCA).
Startups have started to be wary of investing in ESOPs after unicorns like Nykaa, Paytm, PolicyBazaar, and Zomato, who went public last year, encountered shareholder opposition to their ESOP programs due to increased spending on ESOPs. According to Moneycontrol, Policybazaar’s top executives received share-based payments of Rs 406 crore during FY22, which rose five times to cross Rs 410 crore.
A total of Rs 779 crore was paid in ESOP costs by Zomato for its three KMPs in FY22, while Paytm’s ESOP costs soared 50 times to Rs 567 crore in FY22, from Rs 11.2 crore in FY20, due to Vijay Shekhar Sharma’s ESOP expenditures and Madhur Deora’s chief financial officer’s expenditures.
The growing losses of Unacademy are a representation of the significant costs that edtech companies suffer while seeking to recruit customers. Byju’s, the most valuable edtech firm in the world, revealed last month that its losses for FY21 increased 20-fold to Rs 4,558 crore. For the year, Byju’s spent more than Rs 2,500 crore on marketing and promotion, more than any other startup in the nation. In FY21, Unacademy also spent more than Rs 400 crore on marketing and advertising.
While the company’s promotional costs for FY22 couldn’t be readily determined, its other costs for the year, which include advertising costs, were Rs 1,767 crore. Investors’ concerns about the profitability and revenue predictions of edtech businesses have brought their valuations under the spotlight. As a result of the pandemic, schools, universities, and physical tuition centers reopened, and demand for online learning also decreased. Edtech businesses have thus become more frugal with their investment.
To cut expenses, a large number of edtech businesses, including unicorns like Unacademy, Byju’s, and Vedantu, have let go of thousands of staff. Unacademy reduced its burn from Rs 200 crore each month to Rs 50-60 crore last month, according to a Moneycontrol article. By January of the following year, the corporation hopes to become profitable as a whole.
Vedantu, which Tiger Global sponsors, also reduced its burn from Rs 65–70 crore to Rs 15–18 crore. Edtech businesses are having trouble raising money as their losses are growing and their revenue is growing more slowly. Unacademy was having trouble closing a new round of investment at a greater valuation, according to an article.
edited and proofread by nikita sharma