upGrad eyes IPO in next 24 months

The company has so far raised $185 million from investors, the lowest among major peers.

In August, it closed a $185 million funding round from Temasek Holdings Ltd, International Finance Corp (IFC), and IIFL Group, at a valuation of $1.2 billion, propelling it to the list of unicorns, or privately held companies with a valuation of $1 billion or more.

“Not having diluted much early on gave us a lot of flexibility to stick to our conviction and strategy on not getting distracted by what others (investors) ask us to do,” Ronnie Screwvala, chairman and cofounder of UpGrad, told ET in an exclusive interaction.

Founders hold more than 70% stake currently, which Screwvala said might drop to 51% by the time the company is ready for a listing.

According to him, growing an ed-tech business does not need much capital.

“You don’t need billions of dollars to create a category-defining business like ours. For me personally, having been on both sides, of being an acquirer and a company that was acquired, I have come to realise ROCE (return on capital employed) is all that matters,” he said. “We might look to raise one or two more rounds before we go for an IPO,” Screwvala added.

The company has no immediate plans to raise capital even as it is seeing inbound interest from funds, Screwvala said.

Sources in the know, however, said the company was stitching up a larger round of $300-$350 million, likely valuing the firm at around $3-$3.5 billion.

The company is currently clocking an annualised revenue run rate of $250 million and that is expected to reach $500 million by FY23, which is when it will look to list.

“I don’t want the company to list as a small-cap or a mid-cap stock and hence I want it to reach a critical mass before we go public,” Screwvala said.

Founded in 2015 by Screwvala, Mayank Kumar and Phalgun Kompalli, upGrad offers higher education and mid-career upskilling courses for people between 18 and 50.

It currently has more than 2 million users.

“We expect the user base at upGrad in the age group we operate in – the 18-50 years – to grow to 10 million by FY23,” he said.

This growth, says Screwvala, will come from overseas expansion, its integrated offering across segments, newer products within each segment and through tie-ups with more universities as also ownership of universities around the world.

On whether the company will enter the highly competitive K-12 segment, Screwvala said upGrad will stick to its core for now.

“I am not ruling out that possibility. But higher ed – the 18-50 years segment – is massive and has a huge potential. We came in and literally created this category and would want to own this space in Asia and around the world,” he said.

“We want to be a dominant player in Asia, Africa, and the Middle East. Currently, overseas business contributes around 10% of the total revenues, which we expect to be around 50-50 in next 24 months,” he added.

Edtech companies such as Byju’s and others have also expanded overseas to capitalise on the growing opportunities in emerging and developed markets.

In a market where well-funded ed-tech companies such as Byju’s, Unacademy and Vedantu are on an acquisition spree to ensure they stay ahead of the race using the war chest they have raised from risk investors, Screwvala said the speed-to-market strategy has been overrated.

“I am not saying growing inorganically is bad, but I also feel that in M&As, integration is tough, and a lot of value gets lost in the meantime. We did three acquisitions so far, where we felt we either lacked those capabilities or wanted access to that market. We will selectively look at acquisition opportunities in the segment going forward,” he said.

This year, the Mumbai-based firm acquired upskilling platform KnowledgeHut and video-learning solutions provider Impartus. Last year, it scooped up competitive test prep firm The Gate Academy and staffing solutions platform Rekrut India.