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The recent layoffs at the 1% Club, a financial education company founded by Sharan Hegde and Raghav Gupta, have sparked controversy and raised questions about the company's financial practices. The layoffs, which affected 15% of the workforce, were implemented as a cost-cutting measure aimed at securing the company's long-term growth. However, the timing of the layoffs, immediately after Diwali, and the subsequent public criticism from an anonymous ex-employee have brought the company's financial transparency into the spotlight.
The ex-employee, who expressed their disappointment and frustration online, argued that the company, which promotes financial literacy and responsibility, seemed to have failed to manage its own finances effectively. They claimed that the company had hired over 150 employees and set up a lavish office in a high-end area of Mumbai despite having only Rs 10 crore in funding. These allegations, coupled with the timing of the layoffs, fueled public perception that the company was struggling financially.
Hegde, however, defended the company's financial position, stating that the luxurious office was funded through profits generated by the company and not through investor capital. He also revealed that the Rs 10 crore investment was securely placed in a fixed deposit earning 8.5% interest. Furthermore, he highlighted the company's impressive revenue figures, with an annualized revenue of $8 million and a 35-40% EBITDA margin. He attributed the layoffs to redundant expenses and mistakes in hiring, particularly during the company's rapid growth phase.
Hegde acknowledged the impact of the layoffs on the affected employees and assured them that they received a healthy severance package based on their tenure. He also pledged to assist them in securing new employment opportunities by connecting them with industry peers. Despite these measures, the controversy surrounding the layoffs highlights the importance of transparency and responsible financial management, especially for companies that promote financial literacy and education.
Source: Laid-Off Employee Questions Sharan Hegde's 'Financial Literacy', 1% Club CEO Responds