Bootstrapped upskilling firm Intellipaat taps EY for pre-IPO fundraising

To fund the next phase of growth, the company is exploring a pre-initial public offering (IPO) private equity round of about ₹500 crore, before an approximately ₹800 crore IPO within 12-16 months, said founder and chief executive officer Diwakar Chittora.

While the company has not appointed a banker for its IPO yet, EY will advise Intellipaat on its pre-IPO fundraising. “We have multiple business lines, each with significant growth potential. That said, our immediate target for the next one and a half to two years is to reach a revenue of around ₹700-800 crore,” Chittora said. “We also have a very clear vision for the future, with plans to go public in the next 12 to 16 months.”

He added that the company is exploring the private equity round to set a valuation benchmark for its IPO.

EY declined to comment on Mint’s queries.

Current business

Founded in 2011, Intellipaat reported a revenue of ₹182.9 crore and a profit after tax (PAT) of ₹18.5 crore in 2023-24, up from a revenue of ₹70.5 crore and PAT of ₹9.9 crore in 2021-22, showed data from analytics firm Tracxn.

The sharp growth was driven by a spike in demand for the company’s existing suite of offerings in the data science and artificial intelligence space towards the end of 2022 as the buzz around generative AI picked up. “We also held back marketing spend during the peak funding years of 2020-21 when other hyper-funded peers were burning cash. When they exhausted their funds, we ramped up marketing, which paid off especially as demand for AI upskilling peaked,” Chittora said.

The company expects to close 2024-25 with about ₹220 crore in revenue. Chittora believes the aggressive target of ₹700-800 crore in revenue in the next two years is achievable due to its multiple new business lines.

“We were earlier focused only on technology certification courses. Now, we have diversified into management programmes, launched the Intellipaat School of Technology for the undergraduate segment, entered the offline business starting with centres in Bengaluru, and expanded into study-abroad. Each of these verticals will become fully operational in 2025 with their impact visible in the 2025-26 financials,” he said.

The company is targeting about ₹450-500 crore in revenue in the coming year with the incremental revenue from the four new lines of business.

“We have more than ₹130-140 crore sitting in the account as cash,” he said. But, to grow and expand each of the new business lines, Chittora plans to leverage external capital.

“Often entering adjacent opportunities by leveraging ones existing capabilities works out well as you don’t have to reinvent the entire wheel. It’s always relatively easier and more capital efficient to tap adjacent customer segments for growth. Therefore even though crowded, it’s not a bad idea for Intellipaat to tap these adjacencies,” said Abhishek Prasad, managing partner, venture capital fund Cornerstone Ventures.

“One aspect that stands out for Intellipaat is how they been tackling this opportunity with an approach of building a profitable bootstrapped business rather than a high growth venture backed model, which may not have the stability needed to consistently build in this space. Having said that, reaching 3-4X scale in ~2 years is a tough ask,” he said.

Performing sector

Intellipaat operates in the upskilling space with a focus on delivering courses to graduates and working professionals. Currently, around 90% of its revenue comes from the business-to-consumer (B2C) segment, while the remaining 10% is generated from business-to-business (B2B) clients, Chittora said.

The B2B business functions similarly to B2C, except learners access courses through corporate partnerships. The company’s enterprise clients include Wipro, Genpact, Adobe, and Cisco.

Currently, Intellipaat’s programmes cater to individuals ranging from 18 years of age to those nearing retirement.

The upskilling segment has been a bright spot, as it continued seeing demand and fundraising, in the otherwise gloomy edtech sector over the past two years.

When asked why Intellipaat had not raised funds earlier, Chittora said the company’s previous attempts were met with concerns about high competition in the sector for a company operating at a low scale. “Back then, investors’ focus was on revenue growth at any cost, but many companies that raised large sums failed to achieve profitability. We are among the rare edtechs that are operating at this scale with sustainable profits, which is why investors are interested,” Chittora said.

The company competes with well-funded players like Physicswallah, Eruditus and upGrad in the career upskilling space, as well as other platforms like Simplilearn, Scaler, and so on across various segments.

Chittora also believes that it is important to bring in sustainable, like-minded investors, especially in light of how some recent edtech deals have played out. “We have seen founders get misaligned with investors who initially push for rapid revenue growth, saying, ‘Don’t worry about losses, just scale’. Then, overnight, they change their stance and say, ‘Focus only on profitability’. This leaves founders struggling,” he said.

“Raising the PE round should be feasible but with that funding raised, the focus should be on ensuring the business metrics and financial metrics are lining up the IPO in order for the market to under-write the opportunity at appropriate multiples,” Prasad said.