Edtech firm Extramarks has managed a sharp reduction in its losses, slashing them by over 85% to Rs 48 crore in FY24 from Rs 330 crore in the previous fiscal year. However, this financial turnaround came at a cost, as the company’s revenue dropped by 37% during the same period, reflecting a significant contraction in its operations.
Revenue Decline and Shifting Business Focus
Extramarks’ revenue from operations dropped to Rs 233 crore in FY24, a 36.86% decline from Rs 369 crore in FY23, according to its consolidated financial statements filed with the Registrar of Companies (RoC). The decline was largely driven by a steep fall in one-time product sales, which nosedived 75.23% to Rs 54 crore. These sales include digital learning tools such as tablets, test preparation kits, and study materials.
On the flip side, the company saw an uptick in its subscription-based revenue streams. Revenue from services such as live classes, test series, school partnerships, and corporate training grew by 18.54%, reaching Rs 179 crore in FY24. This shift indicates a strategic move towards recurring revenue models rather than one-off sales.
Cost-Cutting Measures Drive Loss Reduction
Extramarks aggressively trimmed its expenses in FY24, contributing to the significant reduction in losses. The company’s total expenditure dropped 46.4% to Rs 372 crore, compared to Rs 694 crore in FY23.
A key factor in this cost-cutting was a sharp reduction in employee benefits expenses, which declined 39.75% to Rs 144 crore. This was largely attributed to mass layoffs, as the company reportedly let go of over 500 employees and shut down its direct-to-consumer (B2C) operations in September 2023.
Another major expense that saw a drastic cut was the cost of materials, which fell 78.57% to Rs 34.5 crore. However, not all expenses followed this downward trend. Finance costs surged 71.43% to Rs 36 crore, highlighting a rise in debt servicing or interest expenses.
Financial Health and Performance Indicators
Despite the decline in revenue, Extramarks’ financial performance showed improvement in key metrics. The company’s return on capital employed (ROCE) improved to -24.19%, while its EBITDA margin also saw a positive shift, improving to -11.63%.
While these figures remain in negative territory, the steep reduction in losses signals a more sustainable cost structure moving forward. Whether this marks a full-fledged recovery or a temporary adjustment remains to be seen, but the focus on subscription-based revenue suggests a longer-term strategic pivot.
Reliance’s Stake and Market Outlook
Extramarks is backed by Reliance, a company with deep pockets and an expanding presence in the edtech sector. The broader edtech market has been facing turbulence, with several companies struggling to maintain their valuations and profitability post-pandemic. Mass layoffs and business model shifts have become common across the industry, as firms recalibrate their strategies in response to changing market dynamics.
For Extramarks, the shift away from hardware sales towards a more service-oriented model aligns with industry trends. Subscription-based revenues provide stability compared to one-time sales, though maintaining growth in this segment will require sustained investment in content and technology.
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