Troubled edtech firm Byju’s has been thrown a lifeline by disgruntled investors who have so far pledged to contribute $300 million to allow it to continue operations. The rights issue, expected to close by the end of the month, has valued the company at $200-250 million—a meltdown of about 95 percent from Byju’s peak valuation of $22 billion.
The bailout has come not a day too soon, but it may not be enough to reverse the downward trajectory. Byju’s has just vacated 4 lakh sq feet of prime commercial space in Bengaluru’s Prestige Tech Park to save Rs 4 crore in monthly rentals. The firm has also been served notice by Kalyani Developers for a rent default on another 5 lakh sq ft of office space.
Over the last few years, the company Think and Learn, founded by Byju Raveendran, has been steadily sinking. Creditors have taken over a Byju’s subsidiary in Singapore; other lenders have gone to court in Delaware in the US alleging the promoters had surreptitiously parked $533 million in an obscure hedge fund.
The company has not yet filed its 2022-23 results; it has only recently filed its 2021-22 financials. What it showed was that though the revenue increased to Rs 5,300 crore, the net loss surged 81 percent to Rs 8,245 crore, or about $1 billion. The company is struggling to pay salaries and incensed investors are now demanding the promoters’ exit.
It is true that the start-up environment has become tougher as funding has dried up. Swiggy, Flipkart and many other e-commerce and delivery-based businesses are facing the heat and being forced to downsize operations.
However, in Byju’s case, it was the inability to reconfigure its business model to a changing market. Online learning, Byju’s USP, thrived in the work-from-home environment of the pandemic. But as the Covid conditions abated, parents and students went back to the offline mode.
Long-term subscriptions were terminated and the earlier cutting-edge online teaching methods deteriorated. Moreover, Byju’s splurged over $1.5 billion of investor money to acquire expensive subsidiaries such WhiteHat Jr. These only added to its losses. Significantly, the only profitable outfit in the Byju’s stable is Akash Educational Services, which had an offline teaching profile.
There are many takeaways from the Byju’s story—the most important being that start-up promoters and investors must be more flexible in a volatile, changing business environment.