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"One of the key reasons why the listing is important for us is that going forward, we plan to announce an employee stock option plan and that would allow being a listed company for our employees to understand the amount of wealth the options could potentially create for them based on their longevity of working with the organisation," says Kalpathi S Suresh, CEO, Veranda Learning Solutions.

Let us talk about the debt repayment. What is the position right now and where will it end up? What is the plan here?Rs 60 crore of debt is being paid out as part of the objects of the issue. There is also a Rs 25 crore liability relating to the acquisition that is getting closed. So post the IPO, now that the funds are available, on a net cash basis, the company would be mostly debt-free. There is long-term debt of an NCD which is maturing in September 2024. That would be the only one that will be outstanding. That is about Rs 74 crore at a 4% coupon.

What are the future growth plans for Veranda? Will it focus on organic or inorganic growth and also have you set any growth targets for the next three years?From an organic perspective, we plan to expand in vernacular languages in state and central government exams. Today we exist in six languages. We plan to add Odia, Marathi and Bengali and take our footprint national. This is as far as state and central government exams are concerned. We plan to set up a network of offline hybrid centres to complement our online presence. This is expected to give us access to the tier III, tier IV towns in India.

So those are the two growth initiatives. If everything works well, that should help Veranda grow multi-fold by FY25. We expect to be growing at a fast pace going forward from here, without compromising on being profitable. We expect to be operational cash flow positive from FY23 onwards and we will be significantly profitable through FY24 and FY25.

From a growth perspective, that should propel the company upwards of Rs 1,000 crore by FY25. This is part of our organic growth. The company is also planning to expand its platform to include other test prep and up-skilling. We are in discussions with many companies with education pedigree and if everything works well, that should add up to our projections and increase the momentum of our growth going into the next three to five years.

Could you tell us about your recent acquisition, Edureka? Give us some more details about this company and how this acquisition is going to streamline your operations?Edureka is a software upskilling platform for high-end software education. They have been a pure online business for over a decade. We acquired the company in September last year and over the last six months, in line with the philosophy of Veranda, we have been preparing the stage for taking them hybrid. This essentially means, apart from expanding their online presence significantly, we are also creating an offline hybrid footprint for education.

This is significant and for me personally, this is going back to where we cut our teeth as entrepreneurs the first time around. This is high-end software education and we are very excited that this is going to be a key area of growth for the company in the next two to three years.

After employees, marketing is one of the biggest expenses for your company. What are the planned marketing expenses that you have already undertaken? Also, what percentage of revenue, your marketing expense would be, going ahead?We expect marketing expense as a percentage of revenue to keep coming down because we expect to aggressively expand our top lines and bottom lines. We want to stay profitable as we spend significantly for marketing. Into FY23, we expect to be spending between Rs 70-80 crore in marketing and we still want to be EBITDA positive, post the marketing expense.

We will thrust significantly in building reach, brand and recall but it would not be at the cost of being profitable. So we will find very innovative ways to market that are effective and at the same time ensure that the company has got a healthy operating cash flow.

One of the issues that the industry you are playing in has to deal with is attrition and in fact in the first half of FY22, this was as high as 37%. Do you expect that to come down? What according to you would be an appropriate rate for attrition?As far as our attrition rates are concerned, it is really driven by two factors. One is our significant investment in core engineering in terms of building the right software platforms through which we deliver our education. Like every other industry, we are also facing challenges in retaining the best talent.

The second one is one of our verticals where we provide high-end software education. So again, retaining high quality faculty with 10 years or more of experience with a masters or PhD type of background is a challenge that, like everybody else in the industry, we also face.

One of the key reasons why the listing is important for us is that going forward, we plan to announce an employee stock option plan and that would allow being a listed company for our employees to understand the amount of wealth the options could potentially create for them based on their longevity of working with the organisation.

We strongly believe that the attrition rates will come down compared to industry averages because we will be listed and we will provide stock options to all our top management.

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Kalpathi S Suresh on how Veranda Learning plans to turn debt-free & expand in next 3 years - Economic Times