Edtech company, BYJU’s founder, BYJU Raveendran vanished, according to recent Forbes Billionaire Index. While start-up community has been talking about BYJU’s net worth zero, a company which was once listed having a net worth of ~INR 17,545 crore ($2.1 billion), has seen significant challenges over past couple years.
As everybody knows, BYJU’s was once valued at a peak valuation of $22 billion. Forbes recently noted that only 4 people from last year’s list dropped off, which includes former ed-tech star Byju Raveendran. His firm Byju’s valuation was recently marked down by global investment management firm, BlackRock to $1 billion.
History of BYJU’s
BYJU’s was founded in 2011 and the company quickly grew to be considered as India’s most valuable startup. In the year 2022, the company’s valuation touched $22 billion when the company’s app used to cater students from primary school to MBA aspirants. However, some of the recent financial disclosures along with controversies led to significant losses for the overall company.
Long-delayed results of the company for the year ended March 2022 exhibited that net loss surpassed $1 billion. As a result of this, BlackRock- the company’s major investor- decided to slash its valuation.
This was not all for the company. Its shareholders- which includes Prosus NV and Peak XV Partners- decided to oust Byju Raveendran from the designation of CEO. Amidst all these uncertainties, it initiated the process of employee layoffs and it termed this as “ongoing business restructuring efforts.”
These lay-offs were conducted mainly through phone calls, which was then followed by email notifications. While BYJU’s net worth zero has been the talk of the town, let us know the company’s rise and fall!
At an extraordinary general meeting (EGM) which was conducted last month, several investors passed resolutions wanting to remove Raveendran, Divya Gokulnath (his wife), and Riju Raveendran (his brother) from the company’s leadership. Validity of resolutions remains with Karnataka High Court.
A quick expansion and extraordinary valuation
In 2015, the company launched flagship learning app, and then it went on to consider and executing such expensive marketing blitz. The company was so valued that it signed up Shah Rukh Khan as its brand ambassador in 2017.
Later on, between 2016 and 2020, it was funded by some of the renowned global investors like General Atlantic, BlackRock, and Sequoia Capital. In the year 2022, it planned to double the number of Byju’s Tuition Centres (BTCs) from ~250 to 500 by the financial year’s close. The company even claimed to be “the world’s leading ed-tech company,” having more than 150 million registered learners on the global basis.
Byju’s was jersey sponsor of India’s cricket team between 2019 to 2023, and the company was also an official sponsor of FIFA World Cup in Qatar in the year 2022.
What went wrong with BYJU’s?
Start-up enthusiasts are keen in knowing how can BYJU’s net worth zero be reality? Actually, the company’s financial results for FY2022, which were announced after 18-month delay, were dismal. Even though the company decided to reduce its workforce by ~5,000 employees and also made significant expenditure cuts in the previous year, its valuation continues to decline
Apart from this, the company has even defaulted on loans taken from the US lenders. In June 2023 month, the company’s auditor, Deloitte Haskins & Sells, decided to resign. The company cited inability to finalise reports for the financial years to Mar 2021 and Mar 2022.
Its lenders have moved to NCLT and the court in the US regarding repayment of $1.2 billion which was taken by its US subsidiary Byju’s Alpha. As a result of this, it saw valuation loss. NCLT then instructed the company to keep proceeds from rights issue in escrow until and unless it resolves the “oppression and mismanagement” plea which has been filed by investors.
Between 2017 and 2021, it made 6 acquisitions and these acquisitions were not able to generate anticipated cash. The company saw fund raising of over $5 billion in equity and debt from several global investors. It then used these funds in acquisitions in 2021 and 2022.
The company’s problems expanded when its $940 million acquisition of Aakash Educational Services Ltd saw troubles on the issue related to stake transfer.
While the company saw significant expansion during Covid-19 years of 2020-21, its growth significantly impacted when offline classes resumed. Full removal of pandemic restrictions, geopolitical uncertainty and rate increases presented significant challenges to edtech sector.
Apart from these issues, the company’s aggressive marketing campaigns, acquisitions at valuations, and financial mismanagement impacted the company’s financials.
So that transparency is maintained on use of funds which have been raised via rights issue, the company plans to appoint third-party monitoring agency. This agency will report to shareholders quarterly, within 45 days from quarter’s end.