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NEW DELHI : Online tutoring platform Vedantu Innovation Pvt. Ltd has laid off 424 employees, or 7% of its total workforce of 5,600, underscoring the stress in the edtech sector as offline classes resume with the pandemic receding and competition rises.

Explaining the reasons for the step, Vedantu’s co-founder and chief executive Vamsi Krishna said in an email to the employees on Wednesday that the current external environment is tough due to the Russia-Ukraine crisis, impending fears of recession, and interest rate hikes by US Federal Reserve that have led to inflationary pressures.

“Given this environment, capital will be scarce for upcoming quarters," he added.

He also said that the hyper-growth of nine times experienced by Tiger Global-backed Vedantu during the last two years will also get moderated as covid-19 tailwinds are receding and schools and offline models are opening up.

“When it comes to building resilience, it is important to build a longer capital runway for Vedantu given uncertainties of the outside world and tightening of capital availability expected for the next few quarters," said Krishna.

Founded in 2011 by Krishna, Anand Prakash and Pulkit Jain, Vedantu became the fifth digital learning startup in the country to hit unicorn status after it raised $100 million ( 740 crore) in a Series E round of funding led by Singapore-based impact investor ABC World Asia in September last year. A unicorn is a privately-held startup with a valuation of at least $1 billion.

Vedantu is currently the fifth most-valuable edtech startup in India after Byju’s, Unacademy, Eruditus and UpGrad.

Earlier this month, Vedantu laid off around 200 employees. A spokesperson said at the time that 120 of the laid-off staff were contractors and 80 were full-time employees.

Other edtech platforms have also fired employees as they struggle with rising competition and the approaching end of the pandemic.

Last month, Unacademy, operated by Sorting Hat Technologies Pvt. Ltd, laid off nearly 600 employees or nearly a tenth of its workforce. In March, Unacademy let go more than 100 consultants from its PrepLadder team.

In late February, another edtech startup Lido Learning asked more than 1,200 employees to resign, saying that it was looking to wind down its operations amid a funding crunch.

Startups outside edtech have also laid off staff this year amid concerns about their high valuations and tepid earnings outlook. Last month, social commerce startup Meesho laid off 150 employees. In February, OkCredit, which is backed by marquee investors including Tiger Global and Lightspeed, laid off around 40 employees.

“We don’t know the specifics of each of these instances (where edtechs have laid off staff), but on a global level, covid winners are giving back some of their gains," said Gopal Jain, co-founder of private equity firm Gaja Capital, that has made multiple investments in the education sector.

“In India, during covid, there was a dystopian situation in the sector where there was a complete shutdown of offline education and a dramatic shift from offline to online. While edtech businesses will see substantial gains, there will be some reduction (of growth), given that the sector is opening up now," Jain added.

Krishna said Vedantu plans to focus on reducing its customer acquisition costs. He told employees that this was a “one- time" activity, and there will be no further cycles of layoffs.

Ranjani Raghavan contributed to the story.

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