Byju’s – a name that echoed through households across India, emblematic of a revolution in education. When the Covid-19 pandemic forced classrooms to close their doors, Byju’s, an online education platform, swiftly emerged as a lifeline for millions of children. Famous celebrities, including Shahrukh Khan and Amitabh Bacchan, endorsed its courses, while the company’s logo emblazoned the uniforms of the Indian cricket team. Byju’s had become the veritable blue-eyed child of the Indian EdTech industry.
Fast-forward to the post-pandemic period, and the landscape tells a different story. An escalating trajectory of success has been replaced by a steep path filled with challenges. Hefty marketing expenditures combined with a perceivable dip in educational standards have put Byju’s into a swirl of uncertainty. To fully appreciate the magnitude of this shift, let’s navigate the tumultuous waters surrounding Byju’s.
At the onset of 2023, Byju’s status as India’s premier EdTech startup seems to be wavering. The warning signs are visible – departure of independent directors, delay in publishing financial statements, and an escalating legal skirmish. The seeds of the current predicament were sown back in November 2021 when Byju’s acquired a syndicated loan, a funding mechanism where multiple lending institutions come together to provide a loan.
Back then, market sentiments were positive, buoyed by the retreat of the second wave of the pandemic. There was an air of optimism that the worst was over, and businesses were rebounding. Byju’s, having thrived during the lockdown, envisaged a bright future and decided to scale up operations. Yet, as schools began to reopen, Byju’s graph started to bend downwards.
The loan agreement stipulated that Byju’s must publish its financial results by September 2022. However, the company missed this deadline, falling into a ‘technical default’. This sparked the lenders to demand a prepayment of $200 million. Byju’s challenged this as ‘predatory lending tactics’ and initiated legal proceedings against the lenders. As the dispute continued to simmer, Byju’s refrained from making a $40 million interest payment in June 2023, citing the unresolved court case as a reason.
This episode exposes the delicate balance of power in the financial world. One of the central issues pertains to bond prices. Typically, when a company or industry becomes riskier, the value of its bond or loan depreciates. The lenders have been accused of intentionally trying to depreciate the value of Byju’s loan to realize higher profits if they resell the loan at a lower price, creating a larger profit margin when the full loan repayment comes due.
Byju’s financial woes are not its only concerns, though. Over time, certain aggressive business practices have also raised eyebrows. Parents of students have expressed discomfort with the company’s high-pressure marketing strategies. Reports also surfaced about a harsh work culture, with employees under immense stress to meet targets. All these factors have compounded the company’s troubles.
It’s worth remembering that Byju’s started with an audacious dream – to transform education in India. It began by championing the cause of online learning, a concept that took root amid the pandemic. However, it soon expanded into offline tuition, creating an integrated hybrid model. The company’s investments in multiple acquisitions, such as WhiteHat Jr, Scholr, and Aakash Educational Services, speak volumes about its expansionist ambitions. Unfortunately, some of these investments have yet to yield the expected returns, and others have drawn criticism and legal hurdles, contributing to Byju’s financial predicaments.
Perhaps the most devastating blow to Byju’s is the plummet in its valuation. From a high of $22 billion, it has sunk to $8.42 billion – a 62.7% decrease. The company’s falling value mirrors the eroding faith of investors and customers alike, a sobering reality check for a once ubiquitous brand.
In summary, Byju’s, the erstwhile crown jewel of the Indian EdTech industry, is now under a cloud. The rollercoaster ride from a pandemic-induced boom to a post-pandemic bust provides a cautionary tale for ambitious startups. To weather the storm, Byju’s will need to streamline its operations, refocus on the quality of its offerings, and build stronger relationships with its customers. Only time will tell if Byju’s can reclaim its lost glory.
