Byju's Explained: Is the Start-up Going Bankrupt?

Byju's was once a celebrated start-up, but now it's struggling to pay its dues.

The Board of Cricket Council of India, or the BCCI, has filed an insolvency petition against Byju's. Apparently, Byju’s owes ₹158 crore of sponsorship money.

The National Company Law Tribunal (NCLT) has appointed Pankaj Srivastava as the interim insolvency resolution professional. This decision means the control has shifted out of CEO Byju Raveendran’s hands after months of financial strain and strenuous court battles.

Seems like the troubles are just piling up for Byju’s. From tonnes of debt to court proceedings and investor allegations to not being able to pay off the salaries of its employees, Byju’s might not be able to recover.

Things have become so bad that it hasn’t even reported its financials for 2023 or 2024. Makes you wonder how a company once valued at $22 billion (approx ₹1.84 lakh crore) gets to the point of insolvency.

Let's find out the story of Byju’s rise and fall and everything in between.

Byju's Rise: The Foundation Story

It all started back in 2009 when Byju Raveendran started tutoring students for competitive exams. In 2011, Byju’s was founded officially as Think & Learn Pvt. Ltd., as a company coaching students offline.

I bet you didn't know Byju's was offline at one point. In 2015, Byju’s went digital by launching the Byju's learning app and the growing curve started.

It expanded its online tutoring services by acquiring TutorVista, Edurite from Pearson, and Vidyartha in 2017. It was also the year Byju’s brought on Shah Rukh Khan as a brand ambassador.

In 2018, it became a Unicorn with a valuation of $1 billion (around ₹8,300 crore). In 2019, it acquired an American educational games maker for $120 million (around ₹1,002 crore) and became the official sponsor of the Indian cricket team by replacing Oppo.

Remember WhiteHat Jr.? Byju's acquired it in July 2020 for about $300 million (around ₹2,505 crore). In September 2020, it acquired a virtual labs simulation startup, LabInApp, and, in November 2020, Byju's replaced Muthoot Group as the title sponsor of the Indian Super League club Kerala Blasters FC.

Byju’s made more acquisitions in 2021, including Scholr, Aakash Educational Services, Epic!, Great Learning, Toppr, Gradeup, Tynker, and GeoGebra. Talk about buying out the competition!

Byju’s acquisition parade continued in 2022 when it acquired Superset, a campus recruitment solutions platform, via Great Learning. It also became an official sponsor of the 2022 FIFA World Cup and announced that Lionel Messi would be its global ambassador. This deal was supposed to last three years but is now on hold because of the many troubles Byju's is facing.

Byju's Demise

Things were going pretty well for Byju’s, but almost every parade gets rained on. In September 2022, Byju’s released its audited financial reports for FY21.

And… cue the crashing and burning.

The FY21 reports showed that Byju's was drowning in losses worth ₹4,588 crore, a staggering amount approximately 15 times more than the reported loss in the previous fiscal year.

Davidson Kempner, an existing investor, was Byju's only hope, from whom Byju’s raised ₹20,925 lakh.

By December 2022, the creditors had gone into a frenzy. One of them, Redwood, had loaned ₹9,840 crore to Byju's, and demanded immediate repayment. In response, Byju’s filed a legal case against Redwood over loan payment pressure in New York.

It only got worse.

In July 2023, Byju’s investor Prosus wrote off 9.6% of its stake due to financial struggles, and in September 2023, BCCI initiated insolvency proceedings against the company for unpaid dues.

In November 2023, the Enforcement Directorate (ED) issued a show cause notice to Byju's parent company and Raveendran for violations of ₹9,362.35 crore under FEMA.

BCCI’s plea for insolvency proceedings against Byju's parent company, Think & Learn Pvt Ltd., was admitted by NCLT in July 2024.

Now, we have come full circle.

The surprising fact is that in 2021, just before signs of trouble became obvious, Byju’s spent a minimum of $2.5 billion (₹20,750 crore) to expand its offerings and reach.

Byju's Legal and Financial Challenges

Byjus’s troubles were many. It was going through tribunal proceedings, facing investor allegations, and suffering financial struggles that led to employee payment issues and job cuts, among other things.

It was Byju against its shareholders. On 29 January 2024, it floated a right issue to raise $200 million (~₹1,674 crore).

That's how it started.

During the month of February, the shareholders issued an Extraordinary General Meeting (EGM) notice to remove Raveendran and his family from the board.

A group of investors, led by Dutch investor Prosus, filed a petition with the NCLT claiming the company was oppressed and mismanaged. NCLT's 27 February 2024 order mandated keeping the offer proceeds (from the rights issue) in an escrow account.

After the mandate, the company came out and told its employees that it couldn’t pay their salaries because it was unable to utilise funds from the rights issue. Byju’s used the funds anyway, "allegedly." Not to pay its employees, though.

Investors claimed that Byjus improperly used the proceeds from the rights issue and issued shares without increasing its authorised share capital.

As a recourse, they demanded blocking the rights issue and removing Byju’s founder, Byju Raveendran, as CEO.

Byju’s is facing an investor revolt, regulatory scrutiny, fund shortages, and weak demand. As of 20 April, it had reportedly only partially paid its employees' March salaries, indicating financial strain. Turns out founder and CEO Byju Raveendran has been raising personal debt against his stakes in Byju’s to cover salary payments.

It ended with the resignation of Arjun Mohan (Byju’s India CEO) and the loss of jobs for over 500 people.

Oh, how the mighty have fallen! Byju’s, once valued at $22 billion (~₹1.84 lakh crore), had to cut off thousands of jobs over the past year and a half.

Byju's Foundation Story & Business Model

Things weren't always bad for Byju's; no, the EdTech start-up was born of hopes and dreams with a bright future.

Byju Raveendran was once a service engineer from Azhikode, Kerala. One fine day in 2003, he started helping his friends prepare for the Common Entrance Test (CAT) exam, and they convinced him to take the exam too. Raveendran ended up scoring in the 100th percentile on the CAT exam in 2003 and then again in 2005. Spurred on by his success in the exam, he decided to switch to teaching.

In 2011, he co-founded Byju's with his wife, Divya Gokulnath, focusing on innovative, tech-driven learning solutions. BYJU'S - The Learning App was launched in 2015, and it achieved two million downloads within three months of launch

He and his wife, Divya Gokulnath, co-founded  Byju's in 2011, focusing on innovative, tech-driven learning solutions. In 2015, BYJU's - The Learning App was launched, quickly achieving two million downloads within three months.

During the first few years,  Byju’s was glorious. It was acquiring companies left and right and expanding its online learning base as we learned above.

It got itself some great deals, too.↓

Byju's became the official sponsor of the Indian cricket team in 2019. Its initial deal with BBCI was a jersey sponsorship agreement for three years, which was extended by one year. It also became an official global partner of the International Cricket Council (ICC) in 2021.

Byju’s got itself a brand ambassador (Shah Rukh Khan) and a global ambassador (Lionel Messi). It also became an official sponsor of the 2022 FIFA World Cup.

Byju’s gave away free access to its app in collaboration with the American India Foundation (AIF) in 2020 to as many as 1 million students in 10,000 schools over the course of three years.

In 2021, Byju’s did a similar thing in collaboration with NITI Aayog for 112 districts all over India in an attempt to make quality education available to all.

Byju's Business Model

Byju's targeted:

• Parents who wanted quality education for their children.
• Students who used the platform to learn (study aid).

The reason why Byju's became so popular so quickly was because it made learning a more fun experience with the help of interactive learning. Byju’s also took advantage of gamification and adaptive learning to engage students and cater to individual learning styles.

Its goal was to use the evolving online education market, specifically in the K-12 segment, to its advantage. It quickly gained millions of users and became one of the top EdTech companies in India.

Now, let's understand how it made money.

Revenue Streams

Byju’s was earning money through multiple revenue streams, such as:

a. Subscription Model: It offers a 15-day trial period, after which users have to subscribe to access learning material at a fee of $10 (~₹837 ) for a month or $100 (~₹8,370) for a year.

b. Offline Classes: For students who prefer a more traditional approach to learning, Byju’s provides face-to-face classes with a two-teacher model.

c. Tablet Sales: Byju’s also sells tablets with educational materials. It was efficiently programmed for learning. For people with limited internet connectivity, the tablets were a great advantage.

With a combination of both online and offline learning, Byju’s was able to provide a varied learning experience to its users. Its collaboration with Disney really enhanced the engagement of young learners with its learning content.

Byju has made a total of 19 acquisitions as of 2023, with a significant number occurring between 2017 and 2021, amounting to an investment of around $3 billion(₹25,010 crore).

Indian EdTech Sector Overview:

The Indian educational market has great potential, with a growth projection of ₹18.8325 lakh crore (US$ 225 billion) by FY25. Its current valuation is somewhere around ₹6,277.5 crore ($7.5 billion), with a projected Compound Annual Growth Rate (CAGR) of 25.8%.

The sector is expected to reach a massive valuation of around ₹2,437.3 crore by 2030 and exceed 100 million paid users.

Even with the many subsegments, including skill development, test preparation, online certification, etc., the growth projections are just… wow!

The emerging trends in India’s EdTech sector:

The EdTech sector is seeing some major reforms lately. Emerging trends include:

1. AI-powered Learning: AI has just become one of those things that’s taking over every sector. Generative and conversational AI has made education more personal and interactive, with 64.87% supporting AI for better learning experiences.

2. Extended Reality (XR/VR)/Virtual Labs: These are doing what students want most: making learning interactive, with many initiatives from the government and EduTech platforms.

3. Gamification: Learning while playing sure sounds fun. With the integration of game-like features and elements, learning is now more fun and effective.

4. Upskilling Demand: The demand for upskilling platforms has shot up. EdTech platforms are taking advantage of this demand by providing self-paced, cost-effective courses that suit professionals as well as job seekers.

The Indian EdTech sector has a lot of growth ahead. Five unicorns—PhysicsWallah, LEAD, Eruditus, upGrad, and Vedantu—are at the helm, steering the sector with innovation.

Byju's Financials

The investors had faith in Byju’s. The likes of BlackRock, Sequoia Capital, and Tiger Global were involved, and during its lifetimes, Byju’s played in huge money. It raised almost ₹49,000 crore in debt financing, acquired 19 companies and made 2 strategic investments.

Things seemed so promising.

In Jan FY24, Byju's finally disclosed its audited financial data for FY22 a little too late and shocked us with this:

Byju's was still viable back in 2022. It earned a revenue of ₹5,298.43 crore and promised strong sales growth, with a 56.8% increase in sales of educational products. However, its expenses were much higher than its revenues (nearly double), leading to huge losses, thanks to its many acquisitions. Another indication that the company was financially unstable was its negative cash flow.

Being in a loss ditch is definitely a red flag.

The company seriously needed financial and operational restructuring, especially given its financial trouble and legal challenges.

Note: Byju's hasn't released its present financials yet. All the data we have is from its 2022 financials.

Peer Comparison

Here are the Financial Metrics and Operational Overview of Byju's peer comparison: ⬇️

Comparing the last available data of Byju's with its peers' recent data, we can see that even now, its revenue from 2022 is superior. Its expansion strategies might have cost the company its financial health but for a while, Byju’s held the market in its hands.

Competitors like Unacademy and Vedantu follow a similar path but on a smaller scale. While facing their challenges, smaller players like iNurture, LEAD, and Cuemath might benefit from more conservative growth strategies focusing on sustainable scaling.

The Bottom Line

From EdTech Giant and a unicorn startup to insolvency, Byju’s has fallen fast and far. The reasons for its fall may be many. It adopted an aggressive acquisition strategy and raised huge amounts of money to support its acquisitions. Then, it struggled to integrate the acquired companies, leading to operational inefficiencies.

Maybe it's as simple as an aggressive expansion strategy failing, but somewhere, someone in some office at Byju's must have foreseen the overwhelming expenses, the negative cash flows, and the proverbial end of the business.

In its hunger to become bigger, larger, and better, it failed to fulfil its promises. It ruined its reputation and forgot to pay its dues. The BBCI insolvency proceeding has brought Byju's to the verge of insolvency. If this isn't a cautionary tale, I don't know what is.

Will Byju’s ever recover or is it a ship bound to sink? Let us know in the comments.

Disclaimer: The stocks, policies, and companies mentioned above are not recommendations from Finology Insider and should not be considered a substitute for professional advice. We strongly recommend consulting a financial professional or conducting thorough research before making any investment decisions.

Also Read:

• BYJU's: The Fall of an Edtech Giant
• Understanding National Company Law Tribunal (NCLT)
• Is EdTech the next big export from India?