CL Educate’s Digital Transformation Gathers Pace

Covid and FY21 proved to be a blessing in disguise for digital businesses. CL Educate has reaped the rewards for being Digital ready well before the start of the Covid phase.

In FY20, CL Educate was deep into its digital drive in both its key businesses – Education (Career Launcher) and B2B Marketing Services (Kestone). 2020 was also a year when CL Educate was completing 25 years; the management did a look-ahead exercise, and decided CL 2.0 had to be digital first.

In its Education business, its tech team was racing ahead to create strong digital platforms to cater to the rapidly changing marketplace. Well-funded Ed Tech companies like Byju’s and Toppr were splurging money, creating an awareness of digital education. While the focus of most of the ed-tech startups is K-12, and CL is in higher education, CL management realised that the market for digital education was coming alive, and it was time to go beyond its traditional offline education business. in FY20, CL launched fully digital options for all its courses: starting first with its smaller streams like GATE, NEET, JEE and IAS; and finally adding MBA (CAT) and Law courses (CLAT) as well.

When Covid struck, CL’s digital engine was all ready. The company could deliver course without disruption. While overall revenue is hit – digital courses are priced lower than offline – but volume performance has been reasonable. Share of digital in Education revenues is up more than 3x.

CL’s digital initiatives in its Kestone business are far more impressive. It was working on a Virtual Event Platform (VEP), where it fast forward the work and managed to launch it by Jun’20. The response from the market and its customers and exceeded expectations. The platform got ranged in top 10 a global research report on this space. Grand View Research rated Kestone’s VEP as among the world’s best 10, alongside such names as  Microsoft, 6Connex, VFairs and Cisco.

Kestone VEP has clocked 200+ virtual events already, and is running at a revenue rate of USD4.2m. Over 600,000 delegates have attended these virtual events, Kestone has analytics on their usage like delegate movements, rooms visited, videos watched etc.

CL management is now keen to build on this transformation. To power the CL 2.0 vision, the company is looking to raise funding in both its business likes: Career Launcher (USD25-40m) and Kestone (USD10-15m). If the plan is successful, the listed company could become a holding company with 2 subsidiaries – one for Education and one for B2B services.

We believe even if one fund raise is successful, there could be a strong rerating of the stock. CL’s share price has underperformed deeply since listing. It currently quotes at say a 0.35x book value; which is very low for a digital focused business. The market on its own may not re-rate the stock till more evidence of digital transformation comes. But if an external investor – a VC Fund – shares into the vision, then listed market investors will get the confirmation they need to re-rate the stock.

The company continues to be net cash positive. Cash and cash equivalents exceed debt by about Rs 30 crore (Rs 300m).

(Wisdomsmith is an advisor to CL Educate on Investor Relations and related areas)

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