The FIITJEE fiasco is a dark reminder of how brutal the competitive coaching play really is. And the media reporting on it has been puke-worthy at best.
For years, brand FIITJEE stood out as a terrific place for students to prepare for JEE. Year on year, the company proved its mettle with extremely impressive results, both as a coaching institute, and as a business. Just some years ago, FIITJEE was bigger than Allen and Aakash combined. This is despite Aakash also having its feet in the medical entrance market, while FIITJEE only played the JEE game.
And while the company grew brick by brick in a purely bootstrapped style, it also managed to rope in ₹100 Cr from Matrix in 2009. Things couldn't have been more solid. The company grew to reach revenues of over ₹600 Cr in FY18, with its students' results absolutely killing it, and the business having decent cash accruals and a solid place in the market.
And suddenly, now we're here. What's happening?
Why are FIITJEE's centres closing? What's with the mass exodus of its Center Managers and its teaching staff? Is there foul play by competitors? Until yesterday, children and their parents really loved the coaching they got from FIITJEE. And now, despite them being happy, some centres are suddenly shutting down with their entire staff moving to an Aakash institute next door?Does that smell of something?
Ideally, these are the questions the media is supposed to ask and look for. Instead, what we heard was them spitting dirt like pure, unadulterated idiots. Disappointing, but not surprising.
So what's the truth?
FIITJEE runs a company owned, company operated model of managing their centres. And while it ran an air tight operation for students' learning, its business operations grew increasingly dependent on centre managers. Or "managing partners" as it called them. These managing partners ran their centres like mini CEOs, who drew terrific salaries along with a share of profits that their centres made.
Now running a chain of coaching institutes is an extremely difficult play. Let's say a teacher gets hired by FIITJEE. He could stay there for a while, and then run off to start something right next door. It'll be small institute with none of the resources, but the brand of a teacher who's "Ex FIITJEE".
On the other hand, the competition grew insane with the VC fueled madness in the coaching institute play.
The existing challenges of the business model, coupled with the new thorns grown with the VC rush, led to FIITJEE's Centre Managers getting poached (even bribed) by the newly funded competition (basically Aakash & Allen) and even the old players like Naraina & Shri Chaitanya. This led to Centre Managers demanding hikes after hikes, basically arm twisting FIITJEE's core leadership. And rather sadly, FIITJEE's leadership relenting to these demands.
So as it happened, while FIITJEE kept performing well as an institute, it grew weak as a business. And then came the final defection which we all saw.
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