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India’s Education and Training sector is relatively young. There is a low school enrollment rate coupled with increasing demand for “skilled” labor. This leaves room for massive growth and investment in the sector. Around a decade ago, there were close to zero education and training stocks. However, the past decade has seen several IPOs of companies dealing in education and technology(Ed-Tech).

According to IBEF, the Indian Education Sector was valued at Rs 6 lakh crore in FY18. Moreover, the sector is growing at ~13% CAGR. The COVID-19 lockdown forced the world to switch to Ed-Tech companies for academic needs, so this CAGR figure may improve more. From workshops to MOOCs to University courses, all of it was online. The EdTech sector’s market size is close to ~Rs. 21,000 crore. Education as a virtue has been talked of for ages, let us dig deep into the finances of the sector.

The Opportunity

India has a fairly young population. Such a young population requires the correct level of education and skill-building. Besides, Access to proper offline education is a problem in rural India. This allows expanding into online teaching.
India’s Gross Enrollment Ratio(GER) is 27% as compared to 88% in the United States. Gross Enrollment Ratio is the measure of students enrolled in a given level educational course, regardless of age. With such low GER figures, there is an opportunity in making education affordable and accessible.

The growing middle class with rising income levels have encouraged better education opportunities. Rising expectations of parents and pupils might not be met with classroom education. This is leading to a switch to online learning where there are multiple sources to learn from that are affordable, sometimes even free.

Evolving Technology: Data Science courses are a popular choice for freshers in the industry. Used in business analytics, finance, stock market, IoT, automobile, etc. As the field evolves, there is a need to update one’s skill sets to keep pace with the rising market. This is when IT training companies like NIIT come into the picture.

Zee Learn

Zee Learn has three product segments:

Educational Services- Schools, Preschools, Vocational Courses, etc.
Construction and Leasing (for education) – constructing, leasing, and renting education infrastructure.
Training and Manpower- training and consultancy in human resources, manpower, business processes, etc.

As of January 2021, the company’s share price has depreciated by ~35% over the past year. The company has a market cap of Rs 423 crore. Educational services contribute a maximum(~75%) to their revenue stream followed by Construction/Leasing and Training and Manpower. In the Educational Services segment, preschool brand KidZee is the highest contributor. The company suffered major losses during the COVID-19 lockdown since it mostly operates physical schooling infrastructures and very few digital platforms. However, the company has slowly started incorporating digital media onto its revenue stream with products such as Robomate, KidZee Learning App, and Tablet.

MT Educare or ‘Mahesh Tutorials’ another test-prep and after-school education center was bought by Zee Learn for a sum of Rs 200 crore. You may check out this interesting investor presentation which gives an overview of Zee Learn, its risks, its competition, and the education sector as a whole.

Career Point

The market cap of Career Point is close to Rs 311.4 crore. The company is a strong performer in the market as compared to its other counterparts in the sector. It has consistently increasing Net Profit and Revenue since March 2016. The company began by offering ‘coaching’ or test preparation for Engineering and Medical entrances in Kota, Rajasthan. However, it now has its hand in both formal and digital education all over the country. The company owns universities, schools, and colleges. It offers e-learning services, live coaching for students, and skill development services to industries. Career Point also has its own Non-Banking Finance Company(NBFC), which specializes in home and education loans. It also has a subsidiary that deals in the publication and production of educational material and accessories.

NIIT

National Institute of Information Technology or NIIT is a skills and talent development corporation with a market capitalization of Rs 1,983 crores. The company has operated on low debt, has an increasing EPS or Earning Per Share, giving great returns over the past 5 years. It has an increasing interest amongst Foreign Institutional Investors(FIIs). The company provides corporate training and skill development services to corporates all across the globe. Its clientele includes DELL, SAP, Shell, Bank of America, Standard Chartered, and many more. Its revenue stream has three segments, Corporate Learning, Skills and Career(SNC), and School Learning Group. The company has changed paths over time. Previously, its main income source was the Skills and Careers Group, where it trained and counseled young individuals right before employment. The focus then shifted to corporate training now, where most of its income comes from.

Source: Company Reports & Ventura Research

Aptech

Aptech is a company, much like its counterpart NIIT. Its market capitalization is close to ~Rs 704 crore. Big Bull Rakesh Rakesh Jhunjhunwala and his wife Rekha Jhunjhunwala together own a 23% stake in the company. Its products and services include:

Arena Animation
Maya Academy of Advanced Cinematics
Aptech Aviation Academy
Preschooling
IT Training
Banking and Financial Services Training
Assessment and Testing Solutions
Corporate Training

As education gets digitized and costs come down, EdTech companies are likely to spring up. One such company with an amazing valuation is BYJUs. Starting as a small EdTech startup, to sponsoring the Indian Cricket Team, the company has come a long way. The company might go public around next year with an IPO.

Conclusion

Indian Education Sector in the stock market has been an underperformer. There are very few companies that hold value and continue to perform well. COVID-19 was a blow for companies that owned physical setups and a boon for the ones invested in e-learning and digital media. Speaking of e-learning, the New Education Policy(NEP) 2020 has emphasized vocational courses, extracurricular activities, and online education. Besides, the Government has rolled out its e-learning platforms like SWAYAM, DISHA, etc. Furthermore, NEP 2020 also emphasizes teacher and faculty training. You can check out the NEP 2020 over here.

An online coding platform for children has been all over the news during the past few days. They have been accused of malpractice and misleading ads. People who had criticised the company have been served with lawsuits. Recently, the personal data of 2.8 lakh students and teachers enrolled in their programmes was reportedly exposed on its servers. The company is none other than WhiteHat Jr, which was recently acquired by Byju’s. Let us understand the details surrounding the various allegations against the company.

Company Profile – WhiteHat Jr

Let us understand what the company actually does. WhiteHat Jr was established in 2018 by Karan Bajaj as an educational technology platform. It conducts various programmes to teach coding to children between the ages of 6 and 18. This is exactly what makes it different from other coding platforms. The company provides a coding curriculum which comprises of Artificial Intelligence (AI), robotics, and machine learning. They are headquartered in Mumbai and have established a presence in India and the US. The 2-year old company was acquired by Byju’s (Think and Learn Pvt Ltd) in August 2020 for a whopping sum of $300 million (~Rs 2,215 crore).

When Did the Problems Begin?

We have clearly understood that WhiteHat Jr’s target audience is children. To ensure that their programmes receive more applicants, they had come up with certain ads during the beginning of the pandemic. These ads contained some surprising claims. Let us look at a few of these.

As we can see, these ads are very bizarre and confusing. The name ‘Wolf Gupta’ is used in multiple ads for different salary packages at the largest technology company in the world. Also, the fact remains that they are creating a sort of fantasy land in which 9 or 13-year olds get salaries worth Rs 150 crore! The company is essentially making claims to parents that their child could become the next Bill Gates or Mark Zuckerberg by learning with WhiteHat Jr.

Here we can see another advertisement by the company that states that children can code a spaceship within 46 minutes! If only things were that easy in life! The EdTech company wants to make you believe that six-year-olds can learn such complicated computer programmes very quickly. There were many other mind-boggling ads from WhiteHat Jr that had circled around social media sites.

Criticisms Against WhiteHat Jr

After going through multiple ads and the website of the online coding platform, a software engineer by the name of Pradeep Poonia started criticising them. He stated that WhiteHat Jr has falsely advertised their products, and most of their stories were fake. He started posting YouTube videos against the company and even shared certain sensitive information on his social media handles. Aniruddha Malpani, an angel investor, also posted content regarding the business practices of WhiteHat Jr. His Twitter feed is filled with serious accusations against the online coding platform.

Some of the posts from Twitter also state that there has been exploitation of teachers and employees. A particular tweet connected to these allegations reveals that employees were forced to work 15 hours every day for 7 days a week. It also states that team leaders would fire or terminate their employees if they raised their voice against such practices.

The WhiteHat Jr Defamation Case

Instead of working towards addressing these criticisms and being accountable for their actions, WhiteHat Jr filed defamation cases against both individuals in November. This is a case which states that Poonia and Malpani had damaged the reputation of the company by saying or writing bad things about them. WhiteHat has stated that the claims made by both individuals are not true.

The Edtech company even used YouTube’s copyright strike feature to take down videos that had been posted by Poonia. Another roast video on WhiteHat Jr’s ads was taken down by YouTube after the company reported it as a copyright violation. This roast video was made by Jihan Haria, a 12-year-old boy from Pune! Just imagine the extent to which they have used their position to cover up all sorts of criticisms.

The defamation case filed against Pradeep Poonia is worth nearly Rs 20 crore! They have also accused Poonia of hacking into the company’s communication platform and obtaining information for his posts. Surprisingly, in the 820-page lawsuit filed in the Delhi High Court, the company even admits that ‘Wolf Gupta’ is an ‘imaginary character’.

Recent Developments

The Delhi High Court, on November 23rd, has given an interim-judgment on the case. The court has ordered Pradeep Poonia to take down some of his tweets that had accused WhiteHat Jr of conducting fraudulent activities. He is also not allowed to use the name ‘WhiteHat Jr’ in videos for his YouTube channel. Aniruddha Malpani has also been retrained from posting and publishing any derogatory content against WhiteHat Jr and its management.

An interesting fact to be noted here is that the company had earlier claimed that they are welcome to any suggestions and criticisms. They had also stated that all criticisms would be used to improve upon their services. However, we have now found out that this is a completely false claim.

The judgment made by the Delhi High Court is not final. The court will hear both sides in the next hearing scheduled on January 6, 2021.

Personal Data Exposed by WhiteHat Jr

On November 24, major news publications reported that the personal data of 2.8 lakh students and teachers enrolled in WhiteHat Jr was exposed to hackers. According to experts, the servers wherein data was stored contained certain vulnerabilities. The database was left open and allowed access to folders containing documents, files, images, and videos. More importantly, it also included the personal data of thousands of minors, their parents, as well as teachers. According to reports, certain documents related to WhiteHat Jr’s court cases were also included in the database.

Usually, these folders can only be accessed by authorised company personnel with a username and a password. The Byju’s-owned company was reportedly able to fix the issue once it was brought to their attention. Initially, it was not clear if any of the user data was compromised.

“We reiterate that no breach of data has happened in this context on company’s computer systems and networks, out of an abundance of caution we are continuing our investigation to ensure that this is the case,”– Statement made by a WhiteHat Jr spokesperson to Quint on November 25.

The Way Ahead

As we can see, WhiteHat Jr is not taking its criticisms well. The company had introduced so many claims that seemed odd or misleading. Poonia and Malpani were just two main individuals, out of many, who dared to voice out their opinions. And now, they have been charged with defamation cases for the same. Their employees and other critics are being silenced and avoided. Do bear in mind that this multi-million dollar company would do everything in its power to get away from accusations.

The recent data leak from the company also shows that there are some serious internal issues too, that the company needs to address. Things are not looking good for the company. Will they be able to completely get away with such fabricated stories? Would this affect the growth of its parent company- Byju’s? Or will people just forget their stories soon? Let us wait and watch.