On Wednesday, July 19, officials from the goods and services tax (GST) visited one of the offices of edtech startup upGrad. While there is no immediate clarity on the exact reason and location of the “survey,” upGrad’s head of legal, Koell Hemdev, confirmed the development, stating that it is a routine survey and the company is fully compliant and cooperating with the department.
upGrad Troubles in the Past Year
This development adds to the series of issues that have plagued upGrad in the last one-and-a-half years. The company faced widespread layoffs, including a 40% staff reduction at its subsidiary, Harappa Education, in January. It also terminated 120 employees at its video learning arm, upGrad Campus, in March.
Additionally, upGrad faced criticism when it abruptly shut down its data science training platform, International School of Engineering (INSOFE), in Hyderabad in April. The move led to protests from students who claimed they were promised jobs upon completing the course.
Mounting Losses and Struggles Amid Funding Winter
upGrad’s financial woes have been a cause for concern as well. The company experienced a three-fold surge in losses, amounting to INR 626.6 crore in the financial year 2021-22 (FY22) compared to INR 211.1 crore in FY21. In contrast, its operating revenue grew two-fold to INR 679.2 crore from INR 327.1 crore in FY21.
The challenging financial situation has put Indian edtech startups in the spotlight, especially during the ongoing funding winter. With capital scarce, upGrad has been actively seeking funds to fuel and scale up its operations. The company recently raised INR 300 crore through a rights issue from investors Temasek and co-founder Ronnie Screwvala in March, just seven months after securing $210 million in August the previous year.
Government Agencies Increase Compliance Efforts
The survey conducted by the GST department is the latest instance of government agencies intensifying efforts to ensure compliance among edtech startups. Earlier in April, officials from the Enforcement Directorate (ED) conducted search and seizure operations at offices and premises linked to BYJU’S over alleged foreign exchange violations.
The Path Ahead for upGrad
With various challenges in its path, upGrad faces the task of navigating financial constraints and addressing operational concerns. The GST survey adds to the company’s troubles, prompting increased scrutiny on compliance matters. As the Indian edtech sector continues to evolve, startups like upGrad must find ways to sustain growth and overcome the hurdles presented by the funding landscape and regulatory environment.
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