The rise and fall of Byju's
Understanding what went wrong at once India's largest EdTech startup.
It takes 20 years to build a reputation and five minutes to ruin it.
- Warren Buffet.
Hello there,
Today, we are going to dive deep into the case of Byju’s. Once the shining star in everyone’s eyes is now gasping for breath. Once valued at over US$22 billion, the decacorn is now worth less than US$2 billion. With more than 95% valuation drop, auditors resigning, mass layoffs, investors writing off their investments, board members resigning and allegations of money laundering on the founder, this is a deep dive into “The Rise and Fall of Byju’s”.
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The Beginning (2011-2017)
Byju, an engineering graduate from Kerela, started teaching for competitive exams like CAT, GRE, GMAT, etc. Within no time, his classroom size grew from a room to a stadium. In 2011, He, along with his brother Riju Raveendran and his wife Divya Gokulnath, started Think and Learn Pvt Ltd. Initially, they focused on the K-12 segment and for competitive exams.
As time went by, Byju’s started raising capital from famous investors like Sequoia Capital (Now Peak XV Partners), Chan Zuckerberg Initiative, Tencent, Mark Zuckerberg and Qatar Investment Authority (QIA).
In 2015, Byju’s launched its mobile app for the K-12 segment. In 2017, they launched Byju's Math App for kids and Byju's Parent Connect app.
The Rise (2017-2022)
By 2018, more than 9 lakh students were paying an annual fee of 10,000 in a country not known to pay for subscriptions of any kind. The app was adding 1,000 subscribers every day with more than 15 million users and had reached an annual renewal rate of 90%. In the same year, Byju’s became India's first tech unicorn. By 2019, 60% of Byju’s students were from non-metros and rural cities.
Byju’s raised US$5.08 billion combined through equity and debt till date.
With every new round of funding, the valuation of Byju’s skyrocketed. At its peak, it was valued at around US$22 billion.
Byju’s saw huge growth in their revenues during the COVID-19 pandemic.
Acquisition Spree
Byju’s started acquiring all the EdTechs that they thought would help them grow their market share.
In July 2020, Byju's also acquired Indian startup WhiteHat Jr for US$350 million. In April 2021, the company also announced the launch of "Byju's Future School", led by WhiteHat Jr Founder Karan Bajaj. Karan Bajaj quit WhiteHat Jr a year after the acquisition.
Byju, in an email announcing the exit of Karan, said, “Having more than exceeded all our mutually outlined goals for the first year, Karan is now ready, as we had mutually decided at the time of acquisition, to progress to the next chapter of his life.”
In April 2021, Byju’s acquired Aakash Institute for around US$1 billion.
Sports Sponsorship
In September 2019, Byju’s replaced OPPO as the official sponsor of the Indian cricket team.
Byju’s became the official Sponsor of the FIFA World Cup Qatar in 2022.
Celebrity Endorsements
In January 2023, Lionel Messi stepped in as the global brand ambassador of Byju’s.
The Fall (2022-Now)
Byju’s downfall was accompanied by notices from ED on potential violations of FEMA by the founders, ASCI asking to stop advertisements of WhitHat Jr to stop them making unsubstantiated claims, and BCCI dragging them to NCLT for allegedly not paying US$55 million of sponsorship fees. As per some speculative reports, the valuation of Byju’s is roughly around US$225 million as of date.
Issues with Term Loan B
Byju's in November 2021 raised $1.2 billion in conventional debt through a term loan B facility (TLB) from a group of overseas investors. A TLB is a type of senior secured syndicated credit facility that is issued by global institutional investors rather than banks. Typically, the proceeds from a TLB are used to either refinance an existing debt or to make overseas acquisitions in order to enhance a company's offerings.
In January 2024, Glas Trust Company, representing over 80% of lenders involved in the $1.2 billion Term Loan B (TLB) secured by Byju's, filed an insolvency petition against the company with the NCLT.
However, Byju’s, in a statement, said that any proceedings by lenders before the NCLT are premature and baseless. After the saga, Byju’s term loan B fell down from around 100 cents on a Dollar to 50 cents on a Dollar.
Struggles of Aakash and Byju’s
As reported by The CapTable — “We are not Byju’s. Aakash is a separate entity. Make it clear to parents.” This was a directive issued to all the sales executives of Aakash in mid-2023, just before the coaching chain’s busy admission season began.
In March 2024, In the National Company Law Tribunal (NCLT) hearing, Think and Learn, the parent company of Byju’s and Aakash Educational Services Ltd (AESL), withdrew the merger petition.
As per the spokesperson of Byju’s, “The petition to withdraw the merger approval was a pre-planned and mutually agreed process. Both companies were running independently as separate entities under the Think and Learn brand and continue to do so. What happened at NCLT today was procedural to complete the required formalities.”
Currently, Pai holds a 39 per cent stake, while Think and Learn hold 26 per cent, Raveendran has a 17 per cent stake and the Chaudhry family and Blackstone hold 10 and 8 per cent, respectively.
In April 2023, Byju’s announced that it would be launching an IPO of Aakash Educational Services Limited (AESL) in the middle of 2024. On the announcement, Aakash’s revenue was on track to reach ₹4,000 crores with an EBITDA of ₹900 crore in the fiscal year 2023-24. We have no updates on that to date.
Byju Vs ED
In April 2023, the Enforcement Directorate (ED) conducted searches and seizure actions at three premises (two business and one residential) in Bengaluru in the case of Raveendaran Byju and his company ‘Think & Learn Private Limited’ under the provisions of Foreign Exchange Management Act (FEMA). ED said, “The company has remitted ₹9,754 crores to various foreign jurisdictions in the name of overseas direct investment during the period 2011-2023.”
As per reports, a complaint was filed against Byju’s for alleged contraventions of the Foreign Exchange Management Act (FEMA) amounting to ₹9,362.35 crore. ED recently requested the CBI to issue a Look Out Circular (LOC) against Byju Raveendran.
Top-level Exits
In June 2023, members on the board of Byju’s, G V Ravishankar of Sequoia Capital (now Peak XV Partners), Vivian Wu of Chan Zuckerberg Initiative, and Russell Dreisenstock of Prosus resigned from the board, citing differences between the founder and the board members. Around the same time, its statutory auditor, Deloitte, resigned, citing delays in the company’s FY22 (2021-22) financial results.
In August 2023, Cherian Thomas, SVP of international business, resigned. Meanwhile, the CEO of WhiteHat Jr, Ananya Tripathi, also resigned. Prathyusha Agarwal, CBO of Byju’s, Himanshu Bajaj, Business Head of Byju’s Tuition Centres and Mukut Deepak, Business Head for Class 4 to 10, have also quit the company.
In September 2023, Byju’s founding member, Mrinal Mohit, resigned. To replace him, Byju’s hired Arjun Mohan as India's CEO. In October same year, Ajay Goel resigned as group CFO within 6 months of joining. In November, Group CTO and President of Technology, Anil Goel resigned.
In January 2024, Byju's group general counsel, Roshan Thomas, quits.
Mass Layoffs
Since October 2022, Byju’s has reportedly laid off more than 10,000 employees. This included people from verticals like strategy, technology, and product. These layoffs also included SVPs drawing salaries to the tune of up to 1 crore a year. This step was taken as a part of the massive restructuring plans under the new CEO of Byju’s.
Piling Losses
Byju’s announced its audited results for FY21 after an 18-month delay in September 2023, with a total loss amounting to Rs 4,588 crore, which was 18 times its loss in the previous year.
Byju’s profit and loss statement for FY21 showed earnings of about ₹2,280.26 crores from its operations. That accounts for most of its total revenue of ₹2,428.39 crores. The company’s FY20 filings showed that it had generated most of its revenue from the sale of tablets and SD cards. Byju’s had received a lot of criticism for it.
Thus, the company changed it to ‘sale of edutech products’. Byju’s got ₹1,848.74 crore from the sale of edutech products that comprise tech-embedded devices, tablets, SD cards and laptops. However, it was mentioned in the notes attached to the financial results and was not mentioned upfront. The sale of edutech products still accounts for most of Byju’s revenue.
Byju’s expenditures swelled nearly 2.5 times in FY21 from FY20 to over Rs 7,027.47 crore. The company’s expenses in FY20 were Rs 2,873.34 crore. Major heads under Byju’s total expenses were advertising and promotional expenses, purchase of edutech products, teachers’ fees and employee benefit costs.
A funding winter in the meanwhile also led to a slump in overall EdTech startup investments to $2.6 billion in 2022 from $4.1 billion in 2021 and $2.3 billion in 2020.
Other Struggles
In September 2023, BCCI filed an application against Byju’s, under the Insolvency and Bankruptcy Code, 2016, before the Bengaluru bench of the National Company Law Tribunal (NCLT) for defaulting on sponsorship dues worth Rs 150 crore.
In December 2023, Byju was said to have infused ₹4000 crores of his money into the company.
Following a series of substantial layoffs, Byju's took the decision to vacate one of its largest office spaces in Bengaluru. According to a report by Moneycontrol, the company is giving up the 5.58 lakh square feet property in Kalyani Tech Park as part of its cost-saving and liquidity-enhancing measures due to delayed funding.
Summary
In June 2024, Dutch technology investor Prosus Ventures written off its entire US$530 million investment in Byju's, six years after initially backing the company. In its annual report, Prosus reported a US$493 million loss for the 2023-24 financial year due to a significant decrease in value for equity investors. The investor's 9.6% stake in Byju's, once valued at approximately US$2 billion during the company's peak valuation of US$22 billion, the investment's fair value has plummeted to zero effectively.
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