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EXCLUSIVE: Byju's Survival Question; Insights from Experts & Industry

Byju's crisis deepens as board members resign and auditors step back, raising questions about the edtech unicorn's future. With only Byju family left on the board along with mountains of troubles, can the edtech reclaim in its position? Read to know.

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Swati Dayal
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EdTech Headache

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The ongoing crisis of Edtech Unicorn Byju's shows no signs of abating, as each day presents a fresh set of challenges for the prominent startup. In a significant development and a major setback, the board of India's leading edtech company is now only left with the founder family, including CEO Byju Raveendran, his wife Divya Gokulnath, and brother Riju Raveendran with all the other Board Members resigning from their posts.

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Rise And Fall Of Byju's 

  • Byju's is facing multiple challenges including layoffs, delayed financial results, and conflicts with creditors.
  • Byju's initially found success with its learning app in 2015, but ambitious acquisitions and the surge in demand during the COVID-19 pandemic led to significant growth.
  • However, the demand for online education in India has declined, and the cost of debt for Byju's has risen, making its expensive acquisitions less appealing.
  • Byju's founder, Byju Raveendran, aims to refocus the company on its core offering: classroom teaching. The acquisition of Aakash Educational Services, a test-prep firm, was a successful move in this direction.
  • Byju's other acquisitions, like WhiteHat Jr, have faced challenges. The company missed a payment to creditors, announced job cuts, and faced accusations of transferring funds out of its US-based borrower.
  • Byju's balance sheet is under pressure, with its loan trading at distressed prices. Creditors may gain control over collateral, including a majority stake in Great Learning, which Byju's acquired during the pandemic.
  • The company is also facing concerns raised by anti-money laundering investigators, and investors like BlackRock Inc. have assigned lower valuations to their stake.
  • Byju's is heavily relying on Great Learning and Aakash to regain stability and address its financial challenges.

The prominent edtech giant, which was once hailed as a symbol of success in India's startup landscape, seems to have encountered substantial difficulties. Adding to the company's challenges, Deloitte too yesterday resigned as Byju's auditor.

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All That’s Wrong At Byjus: Board Members Steeping Down, Auditors Backing Out!

Byju's, the prominent edtech company, has found itself embroiled in a series of troubling developments. The most recent setback came when the company failed to make repayments amounting to millions and became entangled in a legal dispute with a US lender. This unfortunate turn of events has further deepened the crisis that Byju's is currently facing.

Adding to the mounting challenges, significant resignations have been reported within the company. According to the latest reports, three board members, namely GV Ravishankar (MD of early-backer Peak XV Partners, formerly Sequoia Capital India), Russell Dreisenstock (representing Prosus), and Vivian Wu (from Chan Zuckerberg's team), have all stepped down from their positions. The exact reasons behind these resignations remain unclear at this point.

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Two prominent investors had confirmed to the media about the members stepping down from the board of Byju's, the once-promising Indian startup. 

Furthermore, audit firm Deloitte has also resigned as Byju's auditor, citing the company's delay in submitting its financial statements as the primary reason for their decision. Deloitte expressed concerns that "the financial statements of the company are long delayed," leading to their departure from their auditing role.

These developments have intensified the crisis at Byju's, which is already grappling with the repayment of a massive USD 1.2 billion loan. The company's valuation has also suffered a significant blow, plummeting from its peak of USD 22 billion to a mere USD 8.2 billion (over Rs 67,000 crore), as marked by Blackrock.

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Is It A Dead-End For Byju’s Or Just A Road Block?

The road ahead appears increasingly challenging for Byju's, as it wrestles with multiple issues simultaneously. The company's ability to overcome these obstacles and regain stability remains uncertain, with these recent developments casting a shadow of doubt over its future prospects.

As the edtech industry grapples with this crisis, there are valuable lessons to be learned by other startups, particularly those in the edtech sector, from the missteps made by what was once the most profitable edtech startup in the country. Despite Byju's making concerted efforts and introducing new initiatives, reclaiming its reputation and regaining the top position remains a daunting task for the company.

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There Are Lot of Learnings From Byju Episode: Expert

Talking to TICE News, Mr Anil Joshi, Managing Partner, Unicorn India Ventures says, “Venture capital or private equity funding is by nature risky, Byju is one of such situations. While Byju is under stress but it will be too early to write it off as still they have resources to revive and strive. In the short term there will be some impact but that too momentarily as India as an investment destination is very strong and will bring out many good stories to remember. I am sure there are a lot of learnings from the Byju episode and everyone will learn and avoid such situations in their journey.”

What Went Wrong at Byju’s and the Mistakes It Made?

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Amidst a series of challenges, including layoffs, delayed financial results, and conflicts with creditors, Byju's is facing a potential failure in its strategic approach. The company's founder, Byju Raveendran, now faces the task of taking the struggling venture back to its roots: the classroom.

Raveendran Byju, a former teacher from Kerala, launched a learning app in 2015, capitalizing on the smartphone revolution in India. However, the company's success led to ambitious acquisitions, such as the purchase of US-focused TutorVista from Pearson Plc in 2017. The COVID-19 pandemic brought a surge in demand for online schooling, propelling Byju's growth as it acquired various education services firms using cheap funds.

However, circumstances have changed drastically as the demand of online education in India has declined, while the cost of debt of Byju’s has skyrocketed. The expensive acquisitions that once seemed promising now appear less appealing. Additionally, online classes for coding, music, and the arts, with thousands of teachers across multiple countries, have become overshadowed by emerging technologies like creative artificial intelligence tools.

Now again the need was to coach the students secure admission into top engineering, medical, and management programs with the help of talented teachers who have earned their reputation through large-scale classroom teaching.

Raveendran Byju, having been a renowned tutor himself, understood this well. One of Byju's most successful acquisitions was Aakash Educational Services, a 35-year-old test-prep firm purchased in 2021 for approximately USD 1 billion. However, other acquisitions like WhiteHat Jr, a code-writing academy, have faced significant challenges. Notably, on the same day that Byju's missed a USD 40 million payment due to a dispute with creditors, its parent company, Think & Learn Pvt., announced an IPO for Aakash in the coming year. Byju's also implemented job cuts ranging from 500 to 1,000 positions across various departments.

With increased borrowing costs, Byju’s refrained from reducing expenses and stabilize the company's balance sheet rather than just resorting to mass layoffs for cost cutting. 

To worsen the situation further, Byju’s lenders reportedly accused Byju's of transferring USD 500 million out of Byju's Alpha, its US-based borrower. Byju's parent company has denied any wrongdoing or violation of the loan contract, but audited accounts for Think & Learn's March 2022 financial year have yet to be released. Deloitte Haskins & Sells, the former auditor, resigned due to delays in financial statements. 

With the company's USD 1.2 billion loan trading at distressed prices, vulture funds may seize opportunities. Raveendran faces high stakes, as creditors' legal victory could grant them control over collateral, including a majority stake in Great Learning. Byju's acquired Great Learning during the pandemic for $600 million, and its professional courses and university partnerships make it a valuable asset.

Furthermore, a recent search conducted by India's anti-money laundering investigators at Byju's offices has raised concerns, and investors like BlackRock Inc. have begun assigning lower valuations to their stake. To regain stability, Byju's heavily relies on Great Learning and Aakash, especially the latter.

With the company's USD 1.2 billion loan trading at distressed prices, creditors' legal victory could even grant them control over collateral, including a majority stake in Great Learning. Byju's acquired Great Learning during the pandemic for USD 600 million, and its professional courses and university partnerships make it a valuable asset.

Furthermore, a recent search conducted by Enforcement Directorate, the anti-money laundering investigators at Byju's offices has raised concerns, and investors like BlackRock Inc. have begun assigning lower valuations to their stake. To regain stability, Byju's heavily relies on Great Learning and Aakash, especially the latter.

Can Byju's regain its reputation? Let's examine what experts recently shared with TICE News.

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. 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. 

Is Byju's becoming a headache for the entire EdTech sector?

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.”

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.”

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.

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