In recent weeks, FIITJEE, supported by Matrix Venture Partners, has communicated via multiple emails to its employees regarding the deliberate withholding of salaries for the second consecutive month. The company claims that this decision serves as a "wake-up call" to encourage increased productivity among its workforce.
Despite not facing an immediate liquidity crisis, FIITJEE has chosen to suspend salary payments as a motivational measure. This development arises amidst stagnant growth and heightened competition within the test preparation sector across India. Notably, the Indian test prep landscape now features a variety of new-age EdTech start-up's such as Physics Wallach and Unacademic, alongside established brands like Allen and Aakash.
According to executives within the company, FIITJEE disbursed only 50% of January salaries last week, withholding the remaining amount. This action follows reports from February suggesting that January salaries were suspended due to cash flow concerns.
The management at FIITJEE has communicated to its employees that the suspension of salaries is intended to prompt greater commitment and performance. Founder and Managing Director, Dinesh Kumar Goal, emphasized the need for employees to work diligently to ensure the efficient operation of the centres. He underscored the importance of setting clear goals and earning salaries through fulfilling their expected duties.
In a series of emails, Gael expressed disappointment over the centres' performance, stating that none have matched the success of the first centre in Delhi. He urged employees to work with renewed focus and vigor to achieve desired outcomes and fulfil commitments to investors and shareholders.
FIITJEE has outlined specific tasks for employees to accomplish within a week, promising salary releases based on the achievements and commitments made. However, the company has not provided a timeline for when employees can expect to receive their withheld salaries.
Despite raising substantial funds from investors like Matrix Partners India and Kotak Investment Banking in the past, FIITJEE has encountered financial challenges, including slipping into losses in the last fiscal year. The company's revenue has declined, and it has recorded negative cash from operations for several financial years.
Amidst challenges faced by the EdTech sector, including slowing demand and investor confidence issues triggered by problems at industry leader Biju's, FIITJEE's decision to withhold salaries reflects broader difficulties within the industry.
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