Byju's - India's Most Valued Edtech Start-up's Downward Trend/Downward Dwindle (Image: X.com/Byjus)
Byju’s, which was nothing less than a revolution-turned-success, one of India’s most valued edtech start-ups has now been spiraling downward even with the efforts put in to rescue it from a downward trend. Recently, a petition was filed at the National Company Law Tribunal (NCLT) by investors of Byju’s, which alleged the current management of oppression and mismanagement. They pushed for the removal of Byju’s CEO Raveendran, a total revamp of the board, forensic audit and an invalidation of the rights issue.
The petition was led by Prosus, a Dutch investor in the edtech who has only 9.1 percentage in Byju’s after an Extraordinary General Meeting (EGM), which was conducted online and passed. Byju’s Raveendran and his family members has about 26 percentage shares in Think & Learn – the parent company of the education provider Byju’s. They did not attend the EGM and called it invalid, stating that at least one founder was to attend the EGM to be called valid.
Byju’s is not just a pan India education provider – Byju’s has had its presence across the globe and has attracted investments from around the world, which could quote names like the Chan-Zuckerberg Initiative, BlackRock, Sequoia, Aarin Capital and SilverLake. In short, it was called India’s biggest education story.
The venture started in 2006 by offering classes for CAT exam, which later diversified into many levels, from postgraduate students to school going students. Later in 2015, they launched their learning app. Investors began to throng to the edtech. The edtech, along with its primary objective of imparting education began to sell goods – hardware, to students. The company performed well during the covid times. As the company rose to heights, it began an aggressive acquisition path, which in turn, led its nosedive too. It began to get involved in matters of disrepute with investigation agencies raiding the office at Bengaluru citing violations in foreign exchange rules and financial mismanagement.
One led to another as the company’s auditors backed off, pointing their dissatisfaction in the company’s financial statements. Directors began to leave the place, investors began to keep away, employees began to leave the place saying that the work-place culture was toxic and lay-off began to take place. Creditors refused to comply with loan restructuring. Promoters had already lost faith the company. With board members pushing the exit button, only Raveendran, who is the CEO, his wife Divya Gokulnath and Byju’s brother Riju Raveendran remained. The checks and balances had begun to become unbalanced and the most valued edtech start-up which was valued at $22 billion began to dwindle down.
Byju’s took steps by bringing in a new auditor and few members on board to keep the company going. A 2020-21 result of the finances of the company showed that it had lost twice its revenue, i.e., Rs. 4588 cr. Negotiations had failed and investors had begun to sue the company. The company had an inorganic growth with reckless mergers and acquisitions, onboarding of brand ambassadors, ostentatious advertisements and moreover, moral and ethical misconduct. The inside story of the edtech was also not very appealing as employees had raised issues of unscrupulous work-culture and shortfall of payment.
Think & Learn, the parent company of Byju’s also got embroiled in a case of concealing $533 million. A hedge fund from Florida, called from Camshaft Capital Fund is accused of being part of this concealment. This amount was earlier held by Byju’s Alpha Inc., which is a bankrupt shell company. When defaulted on the loan, lenders, owed $1.2 billion, took charge of Byju’s Alpha. The said amount which was transferred to Camshaft Capital Fund, was later transferred again to an offshore trust. As Alpha filed for bankruptcy, the tussle between the lenders for the $1.2 billion and $533 million is now under the jurisdiction of the court ruling in the US state of Delaware.
One of the mistakes that the company did was to oversell technology. Technology should have been used as a complementary tool instead of a replacement. During the covid-19 period, the education provider was coursing a growth curve, it was during this time that the company walked its aggressive acquisition path. Later, after the pandemic period, the growth began to stall, which also had to do with the digital divide and affordability; as the growth pattern was no longer as it used to be, the demand for edtech in a sustained manner could not be maintained.
How a man with modest beginnings has been able to set up an enviable education model, then develop into an ambitious entrepreneur and lose his well-earned success now plays as a chapter for future edutech start-ups. Byju’s was even taken up at the Harvard Business School as a case study.
Experts in this matter refuses to bundle all the blame upon CEO Raveendran, saying that the checks and balances should have been there at all levels, starting from policy making. They point at an absence of regulations and jurisdictions relating to operational guidelines – quality, data security, evaluations and importantly ethical practices. There is no law or policy which looks into edtech sector. The existing framework, says experts, is not enough and more needs to be done.
As Byju’s turns out to be a case of rat race and greed in a competitive environment to strike more profits, the question is whether India”s first edtech unicorn can be saved, restructured and brought into its working, instead of spiraling down-ward into a story of doom.
(With inputs from Byjus.com, The Economic Times, The Indian Express, NDTV and LinkedIn)
