BYJU’s: The Fall of an Edtech Giant

According to Ken Research, the test-prep market has been growing impressively in recent years. From 2020 to 2025, revenues are expected to soar at a commendable compound annual growth rate (CAGR) of 9.3%, primarily driven by the online test preparation market, which is anticipated to expand at an astounding CAGR of 42.3%. 

But despite this encouraging growth trajectory, one business, Byju's, has been grabbing attention like a well-known figure in our 'Bullets' section, where we highlight daily financial news, may be familiar to our loyal readers. Over the past few months, Byju's has been in the spotlight due to the hype surrounding them. Therefore, it is essential that we look further and unpack the ongoing concerns surrounding the company.

Let's quickly learn more about Byju's in general.

About Byju’s

The top edtech firm in the world, BYJU'S, founded in 2011, is revolutionising how students learn with its innovative and fun programmes. BYJU'S provides comprehensive learning solutions from K–12 to competitive exams and professional upskilling, with a global presence in 120 countries and over 150 million enrolled learners.

Although this is common knowledge and what we consistently read, they actually force their teachers to promote the goods. Additionally, they assert that their product is special and will give kids an advantage, but if they are selling the same garbage to everyone, how can their product be special?

Another tactic they do is to specifically contact the parents of the students, explaining to them how poorly their children are performing and how Byju's will help them achieve success. And they succeed in preying on our typical Indian parents.

Entertain yourself as we explore the fascinating sequence of significant news and events that have happened with BYJU'S thus far.

Byju's layoffs  

Byju's chose an unusual route to get rid of stress: it started a weight loss trip by letting go of a sizable chunk of staff from its payroll. I believe everyone must have heard about the layoffs. 102 Indian firms have reportedly cut off 27,103 workers since the funding winter began in 2022.

The table below exhibits the statistics of numerous EdTech companies' layoffs, with Byju's dominating this exercise in workforce restructuring.

While reading about Byju's and its layoff story, I came upon this post of Arpit Singh, an ex-employee of Byju's, who, despite working with utmost dedication, fell for the layoff trap.

While it is fair to say that businesses thoroughly analyse their options before executing layoffs, the effects on the impacted people are significant.
They decided to axe around 500-1,000 more jobs in the third round of layoffs this year, sending the number of employees chopped to 4,000 for the year. From sales and marketing departments to the non-sales teams and senior management, everyone was hit by these rounds of layoffs. What's more, BYJU's sickness spread to its acquisitions as well, with employees from Whitehat Jr being asked to retire voluntarily.

Messi: The global brand ambassador

While financial constraints may be a valid reason for layoffs, it raises eyebrows when a company allocates substantial sums, estimated at $5-7 million annually, towards signing Lionel Messi as the brand ambassador for its social impact arm, Education For All.

Furthermore, it is astounding to think about the additional $30–40 million spent on FIFA World Cup sponsorship. This data makes me wonder why such extravagant expenditures are being made when the company cannot even sustain its employees. It begs the question, what is it that Byju's really cares about? One cannot help but think about the balance between making financial choices and upholding moral obligations as the dust settles around these conflicting actions. 

It serves as a strong reminder that business decisions should be in line with the welfare and values of both the company and its stakeholders.

Byju’s and Aakash ki Daastaan 

In April 2021, Byju's bought Aakash Educational Services (AESL) (the only well-performing subsidiary under them. No, no, not a taunt, just making you guys aware) for a total of over $950 million in cash and equity from Blackstone and the JC Chaudhary Family. 

In spite of a slight payment delay to the sellers in June 2022, JC Chaudhry and Aakash Chaudhry, the company's founders, remained to serve as its managers while operating under Byju's ownership. Along with Blackstone, both founders also invested in Byju's as stockholders.

Byju's founder used cash from his personal firm in Singapore to settle the back payment, demonstrating their dedication to the contract. Later, in October 2022, Byju's obtained unsecured loans of ₹300 crore from AESL, and in May 2023, they obtained an additional ₹2000 crore from David Kempner for the development of AESL.

As per the news that came out on 31st July, 2023, US-based investment fund Davidson Kempner Capital Management has accused Byju's of financial misconduct and has taken control of AESL and its accounts. Byju's representative denies these claims, but insiders suggest that the company went overboard on a loan and defaulted as a result. As a result of this event, Aakash's CEO and CFO have resigned. Davidson Kempner is now managing all financial transactions, allowing payments only after investigation and approval. They have also requested that Byju's return the money, but the business has not yet responded.

Amidst all the other hotchpotch, they plan to come up with Akash’s IPO sometime in 2024. The board already passed the proposal to make the subsidiary public and believes that with this IPO, Aakash will get the opportunity to broaden its reach and improvise its infrastructure (Well, by now, you know who needs to improvise its business, right?)

In the midst of the financial scandal, Davidson Kempner is considering a significant Byju's shake-up! They are considering restructuring the board and might even remove Byju Raveendran from his throne!

The announcement of an IPO launch seems like a desperate attempt to me. 

Money Troubles

Lenders made severe accusations against the company, charging it with concealing a sizeable quantity of $500 million by moving it out of the business account, which is when the problems started. Lenders abruptly withdrew from the process of restructuring outstanding loans, totalling a hefty $1.2 billion, as a result of this stunning news. 

Byju's encountered yet another financial setback when a $40 million interest payment was due on the debt that lenders were trying to renegotiate, which made the situation worse. It would be the largest unrated loan default by a startup in history if this payment was not made in full, and guess what? They made history by defaulting on the payment.

Byju's also experienced delays in submitting its critical financial accounts, which added to the rising worries. These documents are essential for determining the company's financial stability and helping lenders assess credit risk. The delay drew criticism and made Byju's difficulties much more severe.

In a surprising turn of events, Byju's took a proactive stance and filed a lawsuit against its lenders, alleging harassment during the loan recovery process and now they have accused the lenders of making bogus default claims to gain control of the company. This court dispute's resolution is still up in the air, further complicating an already critical situation. The stakes are undeniably high, with financial interests hanging in the balance and the future of Byju's at an important turning point.

Despite missing a deadline to approve an amendment that would have ended the dispute, the attorneys for both sides are currently engaged in heated negotiations to restructure the debt. (Very likely, no?)

Redwood Investments LLC and Silver Point Capital LP are among the lenders accused of placing irrational demands on Byju's. Byju's stakeholders, notably Prosus and Peak XV Partners, have written down investments due to the uncertainty created by the lengthy legal dispute, which has delayed financial reporting.

In my opinion, they should obviously do better at managing their finances. The most valued startup in India? When the “value” is borrowed, what's the point?

Resignation of the auditor & stepping down of board members

The long-time auditor for Byju's, Deloitte Haskins & Sells, presented their resignation. Deloitte was reappointed for a five-year contract beginning on 1 April 2020 after working with Byju since 2016. Their resignation, which was unexpected, was due to large delays in the financial results for the year that concluded on 31 March 2022. Deloitte asserts that by 30 September 2022, these statements must be made available to shareholders at the Annual General Meeting (AGM) in accordance with the 2013 Companies Act.

Due to Deloitte's resignation, Think and Learn Pvt. Ltd.'s financial matters are now being overseen by BDO, a new auditor. 

The parent company's board of directors underwent a change at the same time. The following three directors decided to resign from their seats:

• GV Ravishankar of Peak XV Partners
• Russell Dreisenstock of Prosus, and
• Vivian Wu of the Chan Zuckerberg Initiative

This strategic move denotes a change in the board's makeup, which could have an effect on the organisation's future course and decision-making procedures.

These recent events, including Deloitte's resignation and the changes to the board of directors, point to a moment of transition and reorganisation at Byju's parent business, Think and Learn Pvt. Ltd. Only time will tell how these developments will impact the future course.

Check out BYJU's scammy past and all its acquisitions article if you're interested in learning more about Byju's and its shady past.

The Bottom Line

I must ironically give them an "F" for their current business trajectory. They have all the proper components, including a group of smart founders and a crystal-clear vision for the future of education. Their recent financial difficulties and overly aggressive growth plan, however, raise questions. If Byju's wants to succeed in reaching their long-term objectives, it must excel in profitability and sustainable growth. Will Byju rise to the occasion and solve these challenges, or will they be stuck in detention?

However, I am convinced that Byju's has the brains, but they merely need to address their immediate issues and focus on expansion. It's time for Byjus to create a long-term plan for success. Hoping that they succeed and turn this disappointing "F" into an "A+!"