Byju's, the edtech giant, is facing a challenging period with growing concerns among investors about the leadership of founder and CEO Byju Raveendran. Following a significant drop in valuation from USD 22 billion to USD 1 billion, BYJUs is at risk of losing its unicorn status.
Byju's Valuation Plummets: From USD 22 Billion to Under USD 3 Billion in 12 Month
Once acclaimed as India's first edtech unicorn with a peak valuation around March 2022, the platform has faced successive setbacks in recent years, experiencing a staggering decline in its valuation from a peak of US dollars 22 billion to under US dollars 3 billion in just 12 months.
Between 2021 and 2022, the startup invested roughly USD 2.5 billion in acquiring over a dozen firms. The funding for these acquisitions was drawn from a significant warchest of over USD 5 billion in equity and debt, with support from backers including General Atlantic, Silver Lake, Peak XV, Lightspeed, Chan Zuckerberg Initiative, BlackRock, UBS, Prosus Ventures, and B Capital.In late January, the company initiated a rights issue to raise USD 200 million, open for 30 days.
During the Covid pandemic, Byju's encountered cash-flow challenges and a dispute with creditors over a USD 1.2 billion loan. Shareholders like Prosus and BlackRock sequentially reduced Byju's valuation to USD 11 billion in March, USD 8 billion in May, USD 5 billion in June, and USD 3 billion in November. Prosus disclosed the latest valuation adjustment shortly after Byju's announced a Rs 2,250 crore loss.
Following the aftermath of the Covid-19 pandemic, Byju's faced mounting challenges. Once celebrated for its growth, the company now grapples with a complex situation, marked by its failure to repay a substantial USD 1.2 billion loan, leading to legal disputes with creditors.
Byju's had aggressively expanded during pandemic-induced closures of educational institutions, acquiring numerous edtech startups in India and the US. However, their rapid expansion encountered hurdles as growth significantly slowed once schools resumed operations.
In June 2023, Deloitte resigned as the auditor, and three board members also stepped down. Throughout 2023, investors, including Prosus, began devaluing their investments, causing the company's valuation to drop initially to around USD 5.1 billion and later to less than USD 3 billion.
The financial strain is just one aspect of the predicament; the company is also dealing with legal problems. The company is under scrutiny from the Enforcement Directorate for suspected violations of FEMA.
Byju Raveendran's Stake in Byju's Shares
Byju Ravindran, his wife Divya Rukulnath, and his brother Riju Ravindran currently serve on the company's board. Byju Ravindran recently addressed longstanding issues of poor management and compliance, which he had been working on for several months. Shareholders of BYJUs had requested board meetings in July and December, but their requests were ignored. However, the founders assert that shareholders lack the authority to make such decisions.
According to media reports from December 2023, Byju Raveendran pledged properties worth Rs 100 crore, including his under-construction villa and family residences, as collateral to secure a USD 12 million loan. The collateral included two homes in Bengaluru and an under-construction villa in the exclusive gated community of Epsilon. The loan was utilized by Byju's parent company, Think & Learn Pvt, to meet the salary expenses of 15,000 employees.
Reports indicate that the workforce shrank from a peak of over 55,000 to less than 30,000 by January 2024 due to widespread layoffs.
There also are rumors circulating that the company failed to fulfill its deal with IPL, and a planned agreement with Lionel Messi to become the global brand ambassador was put on hold.
