Once a darling of the startup world, Byju’s or Think & Learn Pvt. Ltd. is finding it hard to standup. Byju’s steep rise and decline is attributed to the over $4 billion in fund raise and over two-billion spent on acquisitions since April 2021 respectively.
In all these acquisitions, it seems to have mismanaged consolidation of assets and misjudged the business synergies and revenue potential.
It won’t be incorrect to say that today Byju’s, one of the largest edutech’s brand, is facing an existential crisis that seems to be spiraling out of control for the discomfort of the start-up world. As a private equity firm told this reporter, it is being kept afloat because the startup world can’t take another shock after the recent brutal market reality check for new age companies. Over the last one year, several start-ups have folded or severely downsized due to funding issues.
Over an year ago, Byju’s celebrated $48 billion valuation and expected equity raising through SPAC listing. That enthusiasm is in sharp contrast to recent reports of $700 million raised at $22 billion valuation. It also calls into question the decision of the investors to bring in monies into the company without updated financials. The last valuation report available for the company is dated Feb 2022, valuing the company at $21 billion.
To be clear, Byju’s has been getting investments into promoter entities, which is being used for fund infusion into the company in the last one year.
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Byju's acquired nine companies for Rs 16,293.50 crore in cash and equity since April 2021. It paid Rs 8,639.5 crore in cash and the remaining in equity for this acquisition. It has effectively used cash and equity to acquire these companies. 47% of the value of the acquisitions is via issuance of equity shares to the sellers. It had paid Rs 10,921.96 crore for these nine acquisition in FY21.
It plans to merge Aakash Education, Toppr Technologies and Grade Stack Learning with itself. It also has plans to come out with a $1 billion IPO for Aakash. That now seems to be on the backburner after the Enforcement Directorate searches over foreign exchange violations.
According to the ED, the FEMA searches allegedly revealed that BYJU’s has received foreign direct investment to the tune of around Rs 28,000 crore since 2011. Further, it is alleged that BYJU’s has also remitted around Rs 9,754 crore to various foreign jurisdictions during the same period in the name of overseas direct investment to acquire companies.
Byju’s overseas acquisitions primarily include Tangible Play Inc., Great Learning Pte. and Epic! Creations Inc. In total, it spent $2 billion in cash and equity for these acquisitions.
Profit is no where in sight.
The edtech major posted a loss of Rs 4,564.4 crore for the financial year ended March 2021. The revenue from operations mainly came from the sale of edutech products, which fell 9.5% in FY21. Byju's claimed that FY22 unaudited revenue stood at Rs 10,000 crore, though no filings are available to confirm it. It delayed the filing of FY21 earnings. The FY22 filing was delayed too and was supposed to be disclosed early this year.
The lack of financials has put the entire operations under scrutiny of regulators and investigative agencies.
It is THINK and LEARN time for Byju’s.
The starting point is disclosure of financials, reset of valuation and consolidation of businesses before it comes to the public market.
