Veranda Learning Solutions Limited

Veranda Learning Solutions reported a robust Q2 FY26, with revenue reaching ₹127 crores, marking a 20% year-on-year growth. The company achieved a gross profit of ₹78 crores, translating to a 61% margin, an improvement of 60 basis points. Adjusted PAT for the quarter stood at ₹23.3 crores, demonstrating a significant 185% year-on-year increase. For the first half of FY26, revenue also grew by 20% and adjusted PAT by 148% year-on-year, underscoring strong operational excellence.

The company's Board approved the demerger of its Commerce Test Prep vertical into a new entity, J.K. Shah Commerce Education Limited. This new entity is projected to be debt-free and is expected to generate approximately ₹350 crores in revenue and ₹140 crores in EBITDA for FY26. Existing Veranda shareholders will receive one share of JKSC for every Veranda share, ensuring continuity of value. The demerger scheme was filed in late September, with regulatory approvals expected to lead to listing by June/July first week of the next financial year.

Veranda divested its vocational and skilling segment, including brands like Edureka and Six Phrase, to SNVA EduTech Limited. This transaction is structured as a share-based arrangement, granting Veranda a 50% stake in the new SNVA EduTech entity. This new entity is projected to achieve over ₹250 crores in revenue by FY26, growing at a CAGR of 25%, with EBITDA exceeding ₹60 crores. This partnership aims to create a comprehensive global education ecosystem and sharpen Veranda's business focus.

All future expansion initiatives, particularly in the academic and government test prep segments, will be asset-light, primarily involving leased premises and working capital investments. The company's total debt outstanding is ₹224 crores with an average interest cost of 14%. Post-demerger, the commerce vertical will be debt-free, while the residual business will carry approximately ₹150-160 crores of debt. Management is in advanced discussions with public sector banks to refinance the high-cost Ascertis debt, expecting a significant reduction in interest costs by Q4 FY26.

Enrollments saw a significant jump, reaching 1 lakh students this quarter compared to 61,000 in the previous quarter. Despite this, deferred revenue decreased from ₹101 crores to ₹94 crores. Management clarified that this is due to a shift in product mix towards recorded programs (USB sticks), where revenue recognition is accelerated upon sale, unlike live programs where revenue is recognized over the course duration. This shift contributes to higher current revenue and EBITDA.

For the combined entity in FY26, Veranda Learning maintains its guidance of ₹650 crores in revenue, ₹170 crores in EBITDA, and ₹70 crores in PAT. Looking ahead to FY27 for the demerged entities, the commerce business is expected to achieve around ₹200 crores in EBITDA, while the non-commerce part (academic and government test prep) is projected to contribute ₹50-60 crores in EBITDA. The company aims to improve the commerce vertical's EBITDA margin from 35% to 46-47% over the next 4-5 years and target an ROE of 24-25% in three years, reaching 30% in five years.