Aakash Educational Services Reports Significant Loss

Aakash Educational Services Ltd (AESL) has announced a loss of Rs 2,443 crore for the fiscal year ending March 2024, primarily attributed to extraordinary items associated with its parent company, Think & Learn Private Limited (Byju’s). These exceptional items encompass considerable finance costs and provisions for loan defaults, repayments, and write-offs connected to a related party.

Revenue Performance of Aakash Educational Services

The revenue from operations for Aakash Educational Services held steady at Rs 2,438 crore in FY24, slightly up from Rs 2,399 crore in FY23, according to their consolidated financial statements acquired from the Registrar of Companies. The company provides coaching for NEET, IIT-JEE, Olympiads, and NTSE, both through conventional classrooms and distance learning programs tailored for medical and engineering aspirants.

Fees paid by students represented 96% of total revenue, increasing by 2% to Rs 2,341 crore in FY24. Conversely, income from the franchisee model declined by 8.5% to Rs 97 crore during the same period.

Non-Operating Income and Expenditure Overview

Aakash Educational Services reported Rs 433 crore in non-operating income, primarily sourced from interest, manpower services, and the unwinding of discounts on security deposits, bringing total income to Rs 2,471 crore in FY24.

Employee benefits, which encompass staff and faculty costs, constituted the largest portion of expenses, accounting for 56% of total expenditure. This particular expense increased by 14% to Rs 1,411 crore in FY24, compared to Rs 1,239 crore in FY23. Additionally, depreciation and amortization costs surged by 28% to Rs 259 crore in FY24.

Costs associated with advertising, promotional activities, study materials, legal fees, IT expenses, and other overheads led Aakash Educational Services to experience a 14% rise in total expenditure, reaching Rs 2,532 crore in FY24 from Rs 2,225 crore in FY23.

Impact of Exceptional Items on Financials

Aakash Educational Services recorded Rs 2,720 crore in exceptional items tied to their insolvent parent, Think & Learn Private Limited (Byju’s), culminating in a net loss of Rs 2,443 crore for FY24. Among the recorded exceptional items, Rs 1,363 crore primarily corresponded to interest and loan obligations associated with Byju’s, while Rs 780 crore in loans to the related party were written off. Additionally, the company incurred a one-time charge of Rs 100 crore as a termination fee related to the conclusion of its service agreement with Think & Learn on May 6, 2023. Other exceptional costs included goodwill impairment worth Rs 102 crore and a write-down of intangible assets valued at Rs 300 crore.

Aakash Educational Services did not provide comments in response to inquiries from Startup Superb regarding the exceptional items.

Loss and Operational Performance

Excluding the effects of the exceptional items and deferred tax, Aakash Educational Services recorded a loss of Rs 61 crore during the fiscal year, in contrast to a profit of Rs 153 crore in FY23. Although facing significant losses, Aakash Educational Services remained EBITDA positive, recording an EBITDA of Rs 307 crore. The Return on Capital Employed (ROCE) and the EBITDA margin diminished to 6.76% and 12.57%, respectively, in FY24.

At the unit level, the company expended Rs 1.04 to earn one rupee in FY24. By March 2024, Aakash Educational Services reported current assets amounting to Rs 315 crore, which included Rs 315 crore in cash and bank balance.

Legal Challenges and Future Prospects

Recently, Think & Learn (Byju’s) initiated legal proceedings against Aakash’s Rs 240 crore rights issue, contesting the NCLAT’s endorsement of the fundraising effort. The court did not grant a stay, allowing Aakash to proceed with the issue while giving Think & Learn the right to subscribe according to its shareholding.

Despite the ownership issues surrounding Aakash, there is no disputing the commendable efforts of the original founders, JC Chaudhry and his team, in building a resilient brand that has weathered the turmoil associated with Byju’s. With the founders now absent from leadership, having wisely taken substantial cash from Byju’s earlier, the company remains one of the few valuable entities within the flawed Byju’s edtech structure. Ranjan Pai, who possesses the largest stake, faces the challenge of reviving the firm. A significant part of this restoration process is complicated by existing legal entanglements, yet Aakash has successfully retained its market position amidst adversity until FY24. It is apparent that the company has since faced strong competition from Physicswallah and others, and the figures for FY25, once available, will provide a clearer picture of the situation. Difficult decisions, including the closure of digital classrooms, have been made. Although the brand may appear to be struggling, there is potential for revival if the right team works towards a fresh start.