Byju's, India's most prominent edtech startup, has recently been embroiled in several controversies. Despite its high valuation, substantial funding, and large user base, critics argue that reclaiming its reputation won't be easy for this edtech unicorn.
Let's explore the main reasons behind these claims and understand the challenges faced by Byju's.
One major issue is the company's significant losses. Despite raising billions of dollars from investors, Byju's has reported substantial losses over the past few years. In the financial year 2020-21, the company's losses grew 17 times to Rs 4,500 crore, a significant increase from Rs 262 crore the previous year. During the same period, revenue also declined by 3%. The primary reason behind these losses is the company's increased expenses, particularly in business promotion and employee benefits. Byju's has heavily invested in marketing, acquisitions, and expansion to grow its user base, product portfolio, and global presence. Unfortunately, these investments have not resulted in proportional revenue growth or profitability.
Another setback for Byju's was a valuation cut down by its investors. U.S.-based investment fund BlackRock Inc. reduced the value of its investments in Byju's. BlackRock, holding a minority stake of about 0.7% in Byju's, adjusted the value of shares held in its funds. In March 2022, BlackRock Capital Allocation Trust valued 2,279 shares of Think & Learn Pvt., Byju's parent company, at approximately USD 10.7 million. Byju's recently secured USD 250 million in fresh funding, reportedly valuing the company at USD 22 billion. However, BlackRock's second markdown reflected concerns over Byju's profitability and its previous job cuts of around 2,500 employees in October, aiming to control costs.
Following the valuation cut, Byju's made headlines again for laying off thousands of employees. In February, the company carried out a round of layoffs, resulting in the dismissal of 900 employees from various departments. This followed a previous round of job cuts in October, where approximately 2,500 positions were eliminated. Despite not having filed its financial reports for FY22, Byju's disclosed a loss of Rs 4,564.38 crore in FY21, surpassing its FY20 loss of Rs 305.5 crore.
Media reports suggest that Byju's is planning to lay off another 100 employees from its centers across the country.
Industry experts have shared their views on Byju's situation. They highlight issues such as aggressive selling practices, faulty business models, and the need for utilizing AI technology earlier.
TICE News spoke to industry experts to know their view on the Byju’s saga.
Mr Prakash Chawla, Independent journalist cum Educator, said, “Byju's, which stood on a high pedestal of valuation reportedly into USD 23 billion (whopping figure close to Rs 2 lakh crore) at one point of time, is in the middle of an unravelling saga of cross-country litigation, investigation by enforcement agencies and layoffs of hapless employees.
A company which reported a loss of about Rs 4500 crore against a revenue of just about Rs 2450 crore in FY'21, was valued at Rs two lakh crore which has now been halved, leaving one in doubt over the entire game of valuation by a few high-heeled investment bankers, venture capitalists and investors with no concern for their money.”
Mr Chawla further adds, “The entire blame should not be on the Byju's promoter(s), who would now be chased in any case as a 'fall guy'. Who does not like to be valued sky high, especially if you have lenders and investors who have to be morons to chase such illusions.
Mr Ashish Jain, Co-Founder, The Startup Board, said, “Byju rose with potential. Attracting investment was a non-issue for it. However, it has lost the potential it could have become. Few reasons are - Market perception among its customers (parents and students) has been dented due to aggressive selling. Its business model was at fault, where agents are incentivized to over commit and under deliver.
Valuation has reached its peak. It is bound to correct downwards. Akash being the crown king. With Akash separated as a public company (through IPO) in 2024, rest of Byju would need to defend hard.”
Mr Jain opines that "AI is disrupting the education sector. Byju should have the vision to utilize the power of ChatGPT API integration much earlier than it is becoming commonplace now. Personalized AI teacher is not far and many smaller companies are doing work that we have no visibility from byjus'. Many nimble and most times better, but smaller, competitors. Like for coding teaching Codlingal, etc. are catching up fast.
Byju has built the brand. However, there is no promise of a brand delivering in future if situation persists as it does today at Byju's.”
Mr Vivek Aggarwal, Founder, Liqvid, a Noida based Edtech said, “BYJU has been valued hugely by the investors. But the recent news flow indicates that it has not been able to fully live upto the expectations. It has several good businesses in its portfolio, however - it’s future will depend on how it resolves it current issues with the lenders - the court cases etc is always a bad sign.”
Byju's has also faced legal issues and negative publicity. The company was raided by the Enforcement Directorate in April 2023 regarding foreign exchange transactions. Additionally, Byju's has faced allegations of violating data privacy and consumer protection laws in India and has been sued by Epic Charter Schools in the US for inflating student enrollment numbers and defrauding the state of Oklahoma.
Additionally, many parents have complained about Byju’s sales agents, claiming they were misled into purchasing expensive courses that were challenging to cancel or get refunds for. Some parents also alleged that they did not receive promised services like one-on-one tutoring and progress reports. Former employees have even claimed they faced high-pressure sales targets and pushy managers.
Another, Edtech-preneur, Mr Saurabh Jain said, “Byju’s stopped focusing on education and focused more on financial jugglery. Thus, it got behind in its core business of education.”
The recent legal action taken by Byju's in the Supreme Court in New York regarding loan acceleration and the disqualification of a lender adds to the company's challenges.
Recently, Byju’s took legal action in the Supreme Court in New York regarding the acceleration of a USD 1.2 billion Term Loan B (TLB) and the disqualification of Redwood, one of the lenders. BYJU’S claims that the lenders, led by Redwood, employed predatory tactics, including unlawfully accelerating the loan and attempting to take control of BYJU'S Alpha, the company entity.
BYJU’S stated that on March 3, 2023, the TLB lenders unlawfully accelerated the loan due to alleged non-monetary and technical defaults. As a result, they took unwarranted enforcement measures, such as seizing control of BYJU’S Alpha and appointing their own management. The company argued that ongoing legal proceedings have caused a dispute over the loan, leading to a halt in further payments, including interest.
Mr Prakash Chawla says, “Byju's describes itself as ''India's largest ed-tech company and the creator of India's most loved school learning app''. Take a good look at the company's profile, cut the jargon and you come to a conclusion it is no more than a coaching centre, enabled by internet technology and tools which offer smart lessons with the help of graphics, stories, videos and so on. All these are available in most of the private schools in big cities and brick and mortar coaching institutions which took to hybrid teaching during Covid.”
But the promoters of Byju's, on borrowed money, went on an acquisition spree. Riding on an irrational exuberance, its acquisition was based on valuation of the target companies in a way exactly similar to crazy valuation Byju's itself enjoyed, helped by gullible tech media. Valuation of Aakash competitive exam business is a classic example. Now that the company which wanted to sell education in a 'product like' business is in a financial mess, it ironically would cause an immense loss to the reputation of the entire startup ecosystem which in any case is going through trying times. The roadmap does not look clear; deadend though extremely painful appears in sight, Mr Chawla adds.
Overall, Byju's is facing a multitude of obstacles that may impact its reputation and future prospects. The company's losses, valuation cuts, layoffs, legal issues, and negative publicity pose significant challenges that need to be addressed for Byju's to regain stability and success in the highly competitive edtech industry.