Cash-strapped edtech company BYJU'S has put its high-profile partnership with football legend Lionel Messi on hold, throwing the future of the three-year deal into uncertainty. Though initial payments to Messi have been made, the company grapples with internal challenges, including a liquidity crisis and mounting losses.
Signed in 2022 for an estimated $5-7 million annually, Messi served as the global brand ambassador for BYJU'S social impact arm, "Education For All." However, the deal sparked outrage as it coincided with employee layoffs, raising questions about spending priorities. BYJU'S defended the move, claiming it was a "social impact arrangement," not a typical sponsorship.
This isn't the only sports marketing deal BYJU'S has paused. The company, known for its hefty advertising spends (nearly $1 billion between 2016-2022), recently opted out of partnerships with major sporting bodies like BCCI, ICC, and FIFA. Notably, BCCI even filed a legal case against BYJU'S after their jersey sponsorship deal fell through.
BYJU's woes extend beyond marketing. The company faces numerous challenges, including board member exits, delayed financial reports, and scrutiny from regulatory bodies. Last month, their FY22 financials revealed an 81% surge in net losses, reaching a staggering INR 8,245.2 Crore.
With internal turmoil brewing, BYJU'S must now decide the fate of the Messi deal. Will they terminate it, seek renegotiation, or find a path to revive the partnership? Only time will tell if the football icon will continue to champion education alongside the embattled edtech giant.
Why BYJU's is in controversy?
Byju's, the once-celebrated Indian edtech giant, is facing a multitude of challenges that threaten its stability. The company's troubles began with a missed deadline for filing its financial accounts, followed by a skipped loan payment and a legal battle with creditors. To add fuel to the fire, several US investors have accused Byju's of concealing a significant amount of money, leading to lawsuits.
Unraveling the Crisis:
- Financial Irregularities: Byju's failure to file its financial statements on time raises concerns about its financial health and transparency. This delay has triggered regulatory scrutiny and potential fines.
- Loan Payment Lapse: Skipping an interest payment on its term loan indicates a liquidity crunch, jeopardizing investor confidence and potentially impacting future funding opportunities.
- Legal Tussle with Creditors: The ongoing legal battle with creditors adds another layer of complexity to Byju's financial woes. This dispute could further strain the company's resources and damage its reputation.
- Investor Accusations and Lawsuits: Accusations of hiding funds by major investors are a serious blow to Byju's credibility. These allegations have led to lawsuits, further complicating the company's legal and financial situation.
Byju's is at a crossroads. The company needs to address these issues swiftly and transparently to regain investor trust and stabilize its financial situation. The outcome of the legal battles and the company's ability to comply with regulations will significantly impact its future.
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