Veranda Learning Solutions, under the leadership of its Executive Director and Chairman Suresh Kalpathi, has ambitious expansion plans despite posting a loss in the October-December quarter.

The company reported a consolidated loss of ₹203 crore, an increase from the ₹16.71 crore loss in the same period last year. However, Kalpathi remains optimistic about future growth, particularly in the K-12 education segment.

A key part of Veranda Learning Solutions’ growth strategy is its aggressive expansion in the K-12 education sector. Currently, the company manages five K-12 schools and two international schools. Kalpathi shared that the company plans to add five more schools by the end of the ongoing quarter.

Over the next three to four years, Veranda aims to increase its portfolio to more than 100 managed schools across India. The company has already identified 40 schools in its pipeline and is in the process of signing Memorandums of Understanding (MoUs) to begin operations, Kalpathi added.

From a financial standpoint, the company expects its EBITDA margins to stabilise at around 25%-26% on a consolidated basis across all its segments.

According to Kalpathi, the company’s Q3 performance was affected by multiple factors. The company’s commerce coaching segment faced disruptions due to a shift in the Chartered Accountancy (CA) academic calendar, which moved from two exams a year to three. This transition has led to a temporary adjustment period for students, affecting enrollment numbers and revenue flow.

Additionally, the government test preparation segment struggled due to a lack of recruitment notifications in most southern states of India. The demand for government exam coaching generally spikes when job notifications are released, which did not happen in the past quarter, leading to subdued revenue generation.

Another significant financial impact was the one-time write-off associated with the amortisation and accelerated depreciation of intangible assets acquired through previous acquisitions. Kalpathi assured stakeholders that these were predominantly non-cash adjustments and would not have a lasting impact on future earnings.

Veranda Learning Solutions has revised its revenue target for FY25, bringing it down from ₹600 crore to over ₹500 crore. The final outcome will depend on government job notifications and CA exam results. Kalpathi emphasised that revenue could exceed the revised target if these variables align favourably. The company expects its pre-adjusted EBITDA to surpass ₹130 crore for FY25.

Edited Excerpt of the Interview: 

Q: Widening losses and just a modest 17% increase in revenues. What were the factors that impacted your earnings in the quarter? What sort of improvement do you see going ahead?

Kalpathi: There are a Couple of factors. First, from a business operations perspective, there has been a change in the CA academic calendar on our commerce coaching segment. It has moved from two exams a year to three exams a year. So, the system is settling down. The student base is also settling down to the new calendar of events. So that’s one. The second one is specific to our government test prep. There have been no notifications in most of the southern states in India. The numbers for the test prep segment for government significantly ramp up when there is a notification for employment in that segment. The third, of course, is a one-time write-off that we took. These are predominantly non-cash intangible assets that had come in as part of provisioning for our acquisitions. So, we have taken this quarter as a one-time, almost all non-cash and intangible assets that we have amortised and accelerated their depreciation.

Q: You have also scaled down your revenue target for the current financial year. Earlier, your revenue target was ₹600 crore, which you’ve now brought down to ₹500 crore. What is the reason for this?

Kalpathi: It’s essentially because the fourth quarter has yet to go through. We are unsure of further notifications that could come or how the CA pass percentages will turn out when the results come out during the second half of this month. If those results come out as expected, as it has been last year, and the notifications come, this revenue could significantly ramp up from ₹500 crore. So, what we have indicated is, assuming the worst case picture, we expect our revenues to cross ₹500 crore for the year still, and our pre-adjusted EBITDA to still cross about ₹130 crore for FY25.

Q: How do you see the EBITDA margins evolving as this one-time adjustment normalises in the coming quarters? Also, how many additional schools are you looking to manage, colleges you will tie up with and new product offerings that you have in the coming months?

Kalpathi: We currently manage about five K-12 and two international schools. We expect to tie up another five schools during the January to March quarter.

Over the next three or four years, we plan to increase the number of managed schools in India to over 100. As we speak, we have a pipeline of close to 40 schools that we have reviewed and shortlisted for signing MoUs and starting work.

Regarding our EBITDA margin, we expect them to start settling around 25% to 26% on a consolidated basis for all the segments in which we operate.

Watch the accompanying video for the entire conversation.