FIITJEE delays salaries citing cash flow issues

Founded in 1992, the New Delhi-based FIITJEE trains students for the Joint Entrance Examination (JEE) for top engineering colleges. (Mint)
Founded in 1992, the New Delhi-based FIITJEE trains students for the Joint Entrance Examination (JEE) for top engineering colleges. (Mint)

Summary

FIITJEE is among India's largest and oldest test-prep coaching centres, but its profits have been declining in recent years amid competition from edtech startups

NEW DELHI : FIITJEE Ltd has suspended salary payments citing cash flow issues, five company executives said, at a time the test preparation firm is squeezed by rising losses and competition. 

The company has assured employees that salaries will be paid, but there is no clarity on when, the executives said on condition of anonymity.

FIITJEE, one of India’s largest IIT coaching chains operating its own centres as well as franchises, conveyed the decision last week.

“Employees were told on 7 February at a meeting in Delhi that salaries for the month will be delayed. The company has been struggling financially for quite some time now, and employees were informed that this is a cash flow issue that the company was working to fix. However, no timeline was offered for when salaries would be released," one of the executives said.

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Founded in 1992, the New Delhi-based FIITJEE trains students for the Joint Entrance Examination (JEE) for top engineering colleges. Its rivals include Toppers Academy, Aakash Institute and PACE in classroom coaching, and Byju’s and Physics Wallah in the online space. The company employs 3,200 people across India.

A second executive said employee expenses have shot up due to “bumper hikes" for teachers, while non-teaching staff pay has remained flat for nearly six years. Posts by former and present employees across forums also make similar claims.

FIITJEE clocked a net loss of 68.54 crore in FY23 even as revenue rose 20% to 541.68 crore, its annual report accessed via business intelligence platform Tofler showed. In the previous year, the company had made a net profit of 37.36 lakh. 

According to the executives that Mint spoke to, as well as two industry veterans, its profits have been declining over the past five years as edtechs gained, and the losses may be even worse this year.

“The company has been penalizing employees of ‘underperforming’ franchises by either deferring or part-paying their salaries," a third executive said. 

At least five outlets across Kolkata, Mumbai and Delhi confirmed this on condition of anonymity, stating the management pressures them to achieve targets or receive restricted payouts. FIITJEE’s employee expenses rose 37.2% to 347 crore in FY23, including 21.4 crore in directors’ salaries.

Emails and messages sent to FIITJEE remained unanswered.

FIITJEE has had troubles paying salaries and making final settlements for ex-employees in the past as well, the executives said. Anonymous reviews on Glassdoor, Quora and AmbitionBox show nearly 100 reports of delays, deductions based on company performance and surprise cuts in the last five years.

Between August and December last year, the company asked its employees to sign a form, authorizing it to hold them liable for its losses. 

“I understand and declare that any losses caused to FIITJEE, its associate or group companies etc., owing to my inaction/omission/gross negligence, shall be my personal liability, and FIITJEE would be at liberty to recover the same from the undersigned," stated the form. 

Mint has seen a copy of the email, which also accused employees of “many derelictions of duties," adding such issues have “affected company growth and profitability."

A former senior executive at a top edtech said, “Entities such as Aakash Institute could invest heavily right as the pandemic started receding, driven by the backing of Byju’s. FIITJEE, however, has been struggling for a while because of fixed expenses, and its revenue has been around the 400-600 crore bracket for a while now. Cash flow expenses affected by rising competition would not be surprising, as a result."

For the company, a big challenge is in high fixed costs, including room rentals, and selling, general and administrative (SG&A) costs.

“FIITJEE’s founder D.K. Goel is also no longer actively involved in operations—which is a further concern," one of the executives said. The company currently does not have a chief executive. “The chief operating officer and chief financial officer are the de facto heads," one of them said.

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