Byju’s, an ed-tech company based in Bangalore, India, has gained significant attention in recent years for its innovative approach to education. However, the company has faced its share of challenges, including a recent fall in revenue and increased losses. In this blog post, we will explore the rise and fall of Byju’s, including the reasons behind its current situation and the controversies it has faced.
Byju’s Overview: Byju’s is a global educational technology firm founded by Byju Raveendran and Divya Gokulnath in 2011. The company offers online learning programs and claims to have over 115 million enrolled students. Byju’s is valued at US$22 billion as of March 2022, making it one of the leading ed-tech companies worldwide.
Recent Financial Performance: Byju’s recently filed its audited results for the fiscal year 2021 (FY21), revealing a 3% fall in revenue to Rs 2,428 crores and a significant increase in losses to Rs 4,589 crores. The company attributed the poor performance to changes in accounting standards, which deferred income recognition to future years. The delayed release of audit reports was caused by revisions requested by the company’s auditor, Deloitte Haskins and Sells.
Factors Contributing to the Fall: Byju’s aggressive growth strategy and increasing costs played a significant role in its declining financial performance. The company’s marketing and promotional expenses accounted for a substantial portion of its overall expenditure, increasing by 150% compared to the previous year. Additionally, rapid hiring during the pandemic led to a significant increase in employee costs.
Additional Challenges: Apart from the financial concerns, Byju’s has been facing other issues. The company has a pending debt payment to Blackstone for the Aakash transaction, which may need to be postponed. Moreover, funding from Sumeru Ventures and Oxshott has not been released as expected, adding further complications.
Controversies: Byju’s has faced controversies related to its marketing practices and misleading advertisements. The company has been criticized for imposing high rates that only the affluent can afford, and former salespeople have accused it of targeting low-income parents. Byju’s subsidiary, WhiteHat Jr., faced scrutiny from the Advertising Standards Council of India (ASCI) for misleading advertisements and aggressive sales tactics.
Conclusion: The rise and fall of Byju’s reflect the challenges faced by an ambitious ed-tech company operating in a competitive and evolving market. While the company has experienced remarkable growth and amassed a significant student base, its recent financial setbacks and controversies raise concerns about its long-term sustainability and transparency. As Byju’s navigates these challenges, it will be crucial for the company to address the issues raised, maintain its commitment to quality education, and regain investor and public trust.
Here are the key points highlighted:
Layoffs: Byju’s initiated layoffs, letting go of a significant number of employees as part of its restructuring efforts. The layoffs affected various departments and even extended to employees of its subsidiary, WhiteHat Jr.
Messi as brand ambassador: Despite financial constraints leading to layoffs, Byju’s allocated substantial sums to sign Lionel Messi as the brand ambassador for its social impact arm, Education For All. This raised questions about the company’s priorities and financial decision-making.
Acquisition of Aakash Educational Services: Byju’s acquired Aakash Educational Services for over $950 million in cash and equity. They plan to launch Aakash’s IPO in 2024, which some perceive as a desperate attempt.
Financial troubles: Byju’s faced accusations from lenders, alleging that the company had concealed $500 million by moving it out of its business account. This led to lenders withdrawing from the loan restructuring process. Byju’s also experienced delays in submitting financial accounts, adding to concerns about its financial stability.
Resignation of the auditor and board members: Deloitte Haskins & Sells, Byju’s long-time auditor, resigned due to delays in financial results. BDO has taken over as the new auditor. Three directors also resigned from the board, indicating a change in the company’s decision-making process.
The article suggests that Byju’s needs to address its immediate issues, focus on profitability, and develop a long-term plan for success. It acknowledges the potential of Byju’s but emphasizes the need for the company to overcome its challenges to achieve sustainable growth.
Byju’s acquired Aakash Educational Services in April 2021 for over $950 million. It further states that Byju’s plans to launch Aakash’s IPO in 2024, with the board already passing the proposal to make the subsidiary public. The aim of the IPO is believed to be expanding Aakash’s reach and improving its infrastructure.
The argument suggests that Byju’s should prioritize resolving its immediate concerns and enhancing its core business instead of proceeding with the IPO for Aakash Educational Services. It asserts that Byju’s eagerness to launch the IPO reflects desperation to raise funds and potentially deceive investors who may invest in the offering. This viewpoint expresses skepticism regarding the timing and underlying motivations behind Byju’s decision to pursue the IPO, implying doubts about the company’s intentions and the potential outcomes of the IPO.
Hire and Layoff game:
Here is the information about the recent layoff of Byju’s employees:
Startup Name
No. of Employees Laid Off
% of Employees Laid Off
Reason for Layoff
Total Employees (before layoff)
BYJU’S
2500
5%
Restructuring
50,000
Unacademy
2040
25%
Cost Cutting
6000+
WhiteHat Jr
1300
20%
Employees Asked to Resign
6000
Vedantu
1109
19%
Financial Constraints
5900
Skill-Lync
400
20%
Adverse Economic Conditions
2000
Source: INC42
The table highlights the number of employees laid off, the percentage of employees laid off, the reasons for the layoffs, and the total number of employees before the layoffs for various edtech companies, with Byju’s being one of the prominent companies in terms of workforce restructuring.
Recently, there was a disheartening incident involving Arpit Singh, a former employee of Byju’s, who unfortunately faced termination from the company.
The resignation of long-time auditor Deloitte Haskins & Sells came as a surprise to Byju’s. Deloitte had been working with the company since 2016 and was reappointed for a five-year contract starting in April 2020. However, due to significant delays in the financial results for the year ending on March 31, 2022, Deloitte decided to resign. They emphasized the importance of making these statements available to shareholders at the Annual General Meeting (AGM) by September 30, 2022, in accordance with the 2013 Companies Act.
Deloitte had been working with Byju’s since 2016 and was reappointed for a five-year contract starting in April 2020. However, the company’s financial results for the year ending on March 31, 2022, were significantly delayed. This led to Deloitte’s decision to resign.
Following Deloitte’s resignation, Think and Learn Pvt. Ltd., the parent company of Byju’s, appointed BDO as their new auditor to oversee financial matters.
Simultaneously, there were changes in the board of directors. Three directors, GV Ravishankar of Peak XV Partners, Russell Dreisenstock of Prosus, and Vivian Wu of the Chan Zuckerberg Initiative, decided to resign from their positions. This strategic move signifies a shift in the composition of the board, which may have implications for the organization’s future direction and decision-making processes.
These recent events, including Deloitte’s resignation and the board changes, indicate a period of transition and reorganization within Byju’s parent company, Think and Learn Pvt. Ltd. The impact of these developments on the company’s future trajectory remains to be seen.
