In this week’s newsletter, we talk about what went wrong with Doubtnut, Wipro’s declining revenues, money tips and a lot more.
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What went wrong with Doubtnut?
Doubtnut was once valued at nearly $150 million. But coaching institute Allen bought the edtech firm last week for a measly $10 million!
Where did it all go wrong for Doubtnut, you ask?
Okay, let’s take it from the top. See, private tuition is a big business in India. Students flock to teachers after school hours to get individual attention. But apparently, over 70% of the time in these classes is spent on clearing doubts. After all, the new stuff is taught in school anyway. So whatever problems the school teacher doesn’t have time to clarify end up being discussed during private tuition hours.
Maybe the founders of Doubtnut realized this was the situation. And they figured that no one in the edtech ecosystem was asking, “Hey, what if you’re doing your homework and get stuck on a problem? You can’t always pick up the phone and dial your tuition teacher. Your friends might not have a solution either. What do you do?”
Sure, you could look it up on Google or YouTube these days. But it’s not easy to get exactly what you’re looking for. Also, if the equations are written on paper, it’s quite a painful exercise to type it all out.
So Doubtnut decided to be a saviour in these situations. You could simply click a picture of the question in a book and you would get a video solution within minutes.
Yup, a video solution created by engineering grads and interns who were sitting in cubicles and sweating it out. They’d look at the most commonly asked doubts on the internet. Then they’d sketch it out, record a voiceover explaining the steps and have the video ready. After this, it was up to the tech chops of the company — it would have to understand a live query, dig into the pre-recorded video library, and spit it out.
And within a few years, Doubtnut reached the top of the doubt-solving edtech totem pole. After all, venture capital investors love a good story. And solving doubts is a great one. Everyone’s been through the pain of being stuck on a maths problem and not knowing what to do. Maybe this resonated with investors. They would’ve believed that even if the company wasn’t making real money, the founders had the smarts to figure it out.
But soon, the cracks began to show.
You see, Doubtnut had a problem. It offered screenshot-based doubt-solving for free. It was a bait to attract customers. That meant if Doubtnut had to make money, it would have to expand its edtech stack — maybe provide live courses. And that would have a twofold problem. Firstly, it would increase costs substantially since they’d have to get tutors. Secondly, it would also encroach upon the turf of incumbent edtechs like Byju’s. It wouldn’t have been an easy battle to win. The way out would be to get acquired instead. After all, it did have millions of users that would be useful to any big edtech firm.
And just when that was looking like an option, the edtech story itself turned sour. The pandemic-induced boom time ended. Byju’s’ financial shenanigans came to light and the whole industry was looked down upon. Investors didn’t even want to touch any edtech with a barge pole. And if there was any serious acquisition discussion going on for Doubtnut, even that would’ve vanished.
On top of all this, something bigger was brewing. Across the shores, Chegg was crashing.
For the uninitiated, Chegg was at one point the most valuable edtech in the US. ‘Chegging’ had even become a verb among college students. It did the same thing as Doubtnut — solve doubts. The difference though was that Chegg primarily relied on actual humans to do this in real-time. Around 150,000 of them. Now Chegg wasn’t a dinosaur. It did strike a deal with OpenAI. The chatbot would dive into its existing database of over 100 million study questions and spit out answers.
But Chegg knew that students were already leaving in the thousands. They all wanted the fancy ChatGPT to answer queries. And when Chegg warned about this problem, investors scampered to the exits. The stock fell by nearly 50% in a single day. And it’s only been downhill from there.
Maybe people in India were paying attention to this too. I mean, comedian turned YouTuber Tanmay Bhat has a channel called Overpowered with 3 lakh subscribers. He talks about AI stuff with a co-host on this. And one of their short videos from June was titled “You can use ChatGPT as Doubtnut now”. Basically implying that the first casualty of ChatGPT’s onslaught was the doubt-solving app.
We’d imagine that all this might have spooked potential investors or buyers, right? Who’d want to pay a premium for Doubtnut amidst all this upheaval?
Oh, and on top of all this, even the Indian government might’ve thrown a spanner in the works. Yup, the government wanted to get into the business of doubt-solving too. Here’s something from Moneycontrol:
In a video demonstration of the tool accessed by Moneycontrol, a student posted a voice message of a math query in Hindi on a WhatsApp chat. The voice note first got converted into a text in Devanagari script and then the answer appeared on the chat itself. All of it happened in a matter of seconds.
In another instance, the student took a screenshot of a math question from his textbook, sent it to a WhatsApp chatbot and received the solution in no time.
Sounds just like what Doubtnut would do, no?
And here’s the thing. The government planned to use Doubtnut’s own repository of questions to do this. All things considered, maybe Doubtnut came to realise that they did not have a clear way to stand out from the crowd. Maybe they realised they had stretched themselves a little too thin.
In any case, we hope that Doubtnut finds a new lease of life under Allen’s stewardship.
What is happening at Wipro?
Miss on All fronts
Revenue — Miss
EBITDA margins — Miss
PAT — Miss
That’s the first couple of lines from Axis Securities’ recent note on IT giant Wipro. See, research firms make projections of what a company’s sales and profits could look like every quarter. And when the company announces its results, they compare the two. If the company fails to match up to the projections, they call it a ‘Miss’. And Wipro missed big during the July to September quarter.
But it’s not just Axis Securities who is disappointed. Mint says that Azim Premji, who founded Wipro’s IT business, is unhappy with how things are shaping up at the company too.
So what’s going on at Wipro, you ask?
Well, the short answer is that it could be the CEO…
For the longer version, we have to rewind to 2020. Back then, Wipro was having quite a torrid time and had fallen to fourth place in the IT pecking order. Its rival HCL overtook it and something had to be done. So Wipro announced a new CEO — a man named Thierry Delaporte. His idea was: “In my Year One, we’ll accelerate growth; in Year Two, we’ll be at the growth level of our competitors; and in Year Three, we will outdo.”
But how would Wipro achieve that growth?
One idea was acquisitions. For instance, Wipro announced a massive acquisition of a London-based consulting firm called Capco. The deal was worth $1.4 billion and Wipro had never splashed that much money on an acquisition. But it did for a simple reason — financial services contributed to 30% of Wipro’s top line. And Capco excelled in this domain. So by buying a consulting firm, Wipro could tack on extra value-added services to its existing clients. And also get a hold of Capco’s existing clients to sell them IT services.
The other way was to bag high-value deals — the $500 million and above kinds. And this endeavour started well. In December 2020, Wipro signed a $700 million deal with German wholesaler Metro to transform the company’s tech capabilities. Delaporte was so confident that the future was bright that Wipro even created a new role and hired a Chief Growth Officer from Accenture to drive its large deals business.
And at first, things looked good. After all, in the decade before Delaporte, Wipro’s revenue had only grown by $3 billion. But within 3 years under his watch, it had already achieved that figure.
But here’s the thing, Delaporte took the top job at Wipro when the industry was riding the tailwinds of the pandemic. Physical offices had to shut down. And suddenly, companies all over the world realized their shortcomings when it came to digitisation. They outsourced their IT transformation needs and companies like Wipro latched on to the opportunity. Business boomed.
But it didn’t last long. And soon enough, the cracks in Delaporte’s vision emerged.
For starters, remember that $3 billion revenue addition under Delaporte’s watch? Well, nearly a third of that came on the back of Wipro’s acquisition spree. Wipro would buy a company and that firm’s revenues would soon get added to Wipro’s top line too. But to get those revenues, Wipro first had to shell out nearly $2 billion from its own pockets.
Now that doesn’t seem like too much bang for the buck, right? And the strategy of ‘use cash to buy companies’ isn’t sustainable either. Especially if the companies you buy also face a slowdown. Which is what happened at Capco.
The other radical idea that Delaporte had was a complete clean-up of the organization.
For instance, out of 750 top executives at the company, nearly 250 of them were laid off within a year. Delapore wanted new blood that could take the company to the next level. But these replacements came at much higher salaries. Maybe that contributed to Wipro’s profit margins shrinking by 3.5%.
Also, that Chief Growth Officer who had to bag the big deals? Well, in the past 3 years, Wipro didn’t win a single mega-deal. Ouch.
Sure, you could argue that IT firms are facing a tough time. The global environment isn’t great and 70% of business typically comes from the US and Europe. When these markets tighten their purse strings, it hurts Indian IT firms. But the thing is that during this same period, Wipro’s rivals bagged at least 9 deals over $1 billion. So it simply means that Wipro has fared worse. Or to put it bluntly — Wipro failed.
And the end result?
For the first time in its history, Wipro’s revenue in each quarter of a calendar year is expected to decline. Its rivals are still growing.
Now we don’t know how Wipro will drag itself out of this situation. The Chief Growth Officer has already resigned this week. A re-restructuring of some of the functions seems to be underway. And there might even be calls to sack the CEO.
So yeah, we’ll just have to see how Wipro manages to turn things around. And we hope they do.
Money Tips 
: The thin line between savings and stinginess
Imagine waking up one morning to find out that your toothpaste tube is almost over. What do you do?
I would even out all the paste from the end of the tube and squeeze it all the way towards the cap. That way I’d have enough toothpaste to use for two more weeks. And I know that you’d agree with me on that, especially if you’re Indian.
We love squeezing out every penny’s worth of things we use at home even if it’s not toothpaste. Got a faded or torn tshirt? Use it as a wastecloth for cleaning. Got an old toothbrush? Use it to clean your comb. An empty box of Danish cookies? Use it to store your sewing kit. I can go on and on. But what does all that have to do with money?
Well, in wanting to make the most of things we often forget that we can be silly.
Just think of how you bargain with your local vegetable vendor (or sabziwala). You always want him to toss in some free coriander, add an extra veggie or pay less per kilo. But we don’t do that at a supermarket. We can’t.
Neither do we remember the amount of money spent on things that may not be used to their fullest potential. For instance, maybe you signed up for an annual OTT subscription, but you may have been too busy last month to watch anything on it. These little things eat into your savings too. And it’s important to realise that when you bargain. There’s a very thin line between saving money and coming across as stingy.
So the next time you bargain, remember to be sensitive about whom you’re bargaining with. In the end, everyone’s trying to make the most out of their money.
Jargon Explainer 
: Freemium
Today’s Quote 
The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind.
—T.T. Munger
And that’s all for today folks! If you learned something new, make sure to subscribe to Finshots for more such insights 🙂
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