If you were to enrol in a business management program at India’s marquee institutions a few years from now, Byju’s will likely be taught as a case study, with a title as dramatic as “Back from the Brink,” or in the event of adverse fortune, “So Disdained.”
Once ranked as India’s most valuable startup, Byju’s now faces a storm of challenges. Critics and outgoing auditors have not spared the corporate. Amid accusations of mismanagement, misuse of investor money, and non-inclusive decision-making, misrepresentation is a term being bandied about.
To fully understand the company’s current state, one must first understand the backdrop. Two teachers from humble backgrounds created a global brand from scratch. Such was the meteoric rise, the company emerged as a gamechanger in the growing world of edtech. How did the brand scale so high?
Ambitious acquisitions
From a humble start in 2003 when eager students gathered in a coaching center, to an auditorium equipped with a six-sided screen viewed by almost 25,000 students, to developing The Byju’s Learning App in 2015, and attracting investment from global private equity and venture capital firms and billionaire Mark Zuckerberg, founder Byju Raveendran has indeed scaled up on a scale not quite seen in the past.
Byju’s was an early online provider to digitize school curricula across three academic boards, facilitating home learning before, during and after the pandemic. The company’s growth, however, came in tandem with problems of scale.
Sustained management of a large pool of employees, multiple entities and a long list of global investors proved challenging. High-profile sponsorships, once seen as a brand-building exercise, began to look like extravagances. Interactions with venture capitalists and private equity firms could have been handled more adeptly, potentially avoiding boardroom conflicts.
Acquisitions, the speed of which made corporate India sit up and take notice, did not end well, for the acquirer. The list is worth a look:
July 2017: TutorVista, Edurite - one of the largest online tutoring brands with roots in India and catering to school and college students, majorly in the USA, for an undisclosed amount.
.January 2019: Osmo, a leader in blended learning educational games crafted for children aged 3-8 years, for $120 million.
July 2021: The top-rated kids’ learning platform in the U.S., named Epic! in a $500 million cash-and-stock deal.
Add to the above, buyout of WhiteHat Jr. (imparting coding skills for 6-18 years age group) and Toppr (an app for after-school learning) and a stake in Aakash Educational Services Limited (Aakash), a prominent coaching chain.
Aakash was one of Byju’s biggest bets, for which the company paid $950 million in 2021, to make an entry into the exam prep sector. The combined entity, titled Aakash BYJU’S, proved the power of ‘phygital,’ the sync between digital and the physical, and its value for students. The integration with Byju’s digital platform helped enhance its market reach and product portfolio. With majority stake divested earlier this year, Aakash is now nurtured as an independent brand.
All this necessitated substantial investment of nearly $1 billion in three years – a quantum many times higher than the funds invested by most conglomerates from the private sector in India - in greenfield or brownfield industrial projects, GCCs, and alternative energy enterprises.
With investor funding fully utilized for acquisitions, and the US market appearing to have high potential, the founders availed a Term Loan of $1.2 billion from two American banks. The move started on a good note and went sour when the primary lenders sold parts of it in the secondary market, which changed the lender table into multiple entities. This led to litigation in US courts with the consortium of lenders and their trustee filing for control of Alpha Inc., the company’s subsidiary in Delaware.
Byju’s filed a counter in the New York Supreme Court, stating that the entry of secondary lenders was not with its consent, and alleging lenders were putting pressure to recall in 3.5 years a loan repayable in 2026, which it claimed was a breach of the loan agreement.
The positive side
In all the minuses, let us not ignore the plus signs: Byju’s is the only edtech firm from India with a global footprint, operating in over 20 countries. According to the co-founder, Divya Gokulnath, the company serves over 7.5 million under-served students in remote areas through its non-profit venture “Education for All.” Its 10,000+ teacher fraternity comprises mostly women. A massive digital footprint - with web and app properties, which Ms. Divya says attracted over 250 million visitors in September 2024 – makes the learning platform a case study in marketing technology.
While the parent company Think & Learn has posted a loss of over ₹8,000 crore in its latest financials, revenue has climbed from ₹2,500 crore a year before to ₹5,300 crore this year. This while insolvency and takeover petitions have been filed in US and Indian courts and investor funding is at an ebb. The edtech major, however, continues to bank on its biggest asset – the brand name.
Beyond brand power, some reports say the company has created more than 200,000 direct and indirect jobs over the years. This has inspired other Indian edtech firms to walk a similar path, though with caution, not wanting to repeat the mistakes of the maverick.
Shadow over survival
Here are questions Byju Raveendran, the man who scored 100% in the Common Admission Test, must reflect on and answer:
Will the learnings help to correct the blunders? Will he able to save a company that faces challenges from several quarters?
At the time of writing in October 2024, multi-level tidal waves continue to lash the educator hailing from the coastal district of Kannur - insolvency threat, auditor resignation, cash crunch and more. Yet, the committed teacher, with a medley of dreams, defiance and perseverance, will continue to make thousands of entrepreneurs think beyond their safe environs.
In the final analysis, is it time for a new beginning? Or are we awaiting a foregone conclusion? Whatever the outcome, the much-trolled man who once strolled the palm-fringed sands of Payyambalam Beach doesn’t seem to be blinking.
(The writer is a former journalist now serving as a communications consultant. Views expressed are his own).
Published - October 03, 2024 11:33 am IST