Veranda Learning

Veranda Learning has completed a significant strategic realignment under its 'Veranda 2.0' framework. This includes the demerger of its commerce test prep vertical into J.K. Shah Commerce Education Limited, which is projected to achieve ₹350 crores in revenue and ₹140 crores in EBITDA for FY26. Additionally, the vocational and skilling segment, comprising brands like Edureka and Six Phrase, has been divested to SNVA EduTech Limited, forming a new entity where Veranda holds a joint 50% stake. This new entity is projected to generate over ₹250 crores in revenue and more than ₹60 crores in EBITDA for FY26, growing at a CAGR of 25%.

The company reported strong financial results for Q2 and H1 FY26. Q2 revenue stood at ₹127 crores, marking a 19% year-on-year growth, contributing to a 20% YoY revenue growth for H1. Gross profit for Q2 was ₹78 crores, with a margin of 61%, representing a 60 basis points improvement. Q2 EBITDA reached ₹48 crores, and adjusted PAT surged by 185% YoY to ₹23.3 crores, with H1 adjusted PAT increasing by 148% YoY. The company also achieved its highest-ever cash collection of ₹173 crores in Q2.

Veranda Learning is committed to an asset-light expansion model across its academic and government test prep verticals, focusing on lease deposits and working capital rather than heavy physical asset investments. The commerce vertical, currently operating at a 35% EBITDA margin, targets a significant expansion to 46-47% over the next 4-5 years, driven by the increasing adoption of online models. The academic business aims for a 7.5-8% increase in student intake and a 7-8% annual fee hike, contributing to steady growth.

The company is actively working to optimize its capital structure. The commerce vehicle is expected to be debt-free post-demerger, while the residual business will carry approximately ₹150-160 crores of debt, with a projected net debt to EBITDA ratio of 2.5x to 3x for FY27. Management is in advanced discussions with public sector banks to refinance the current high-cost Ascertis debt (around 17% interest) to a lower, high single-digit rate, expecting a dramatic reduction in finance costs by Q4 FY26. One-time^📎 acquisition payouts of ₹100 crores in H1 led to negative cash flows, but these are non-recurring^📎.

Management clarified that the mix of program offerings significantly influences revenue recognition and deferred revenue. Live online or offline programs lead to higher deferred revenue recognized over the course duration. However, the increasing proportion of recorded programs, such as USB sticks, results in accelerated revenue recognition at the point of sale. This shift, particularly with BB Virtual being fully integrated for FY26, explains the observed decrease in deferred revenue while contributing to higher reported EBITDA and revenues this year.

Veranda Learning has set ambitious Return on Equity (ROE) targets for the group, aiming to increase from the current 12% to 24-25% within three years and 30% within five years. This improvement is linked to moving past the impact of past acquisitions made at higher multiples (8-10x EBITDA) and leveraging the benefits of asset-light expansion, margin expansion in core verticals, and overall operational efficiency. The strategic realignments and deleveraging efforts are designed to unlock significant shareholder value.