Unlocking the Enigma: Byju’s Valuation Slump and Investor Anxiety Unveiled

Byju's valuation cut, from $22 billion to just $8.4 billion within a little over a year, has triggered a debate on the future growth potential of the most valued edtech startup in India and worldwide. Once again, the existing investor BlackRock has readjusted the valuation of India's most valued Edutech startup.

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Byju’s once again finds itself in hot waters. The latest blow comes from none other than Blackrock, the world’s largest asset manager, who has dramatically reduced Byju’s valuation for the second time in just three months this year. India’s ed-tech major Byju’s current valuation stands at just $8.4 billion, a far cry from its previous valuation of $22 billion in March 2022 and $11.5 billion in March 2023, as adjusted by its own investor BlackRock. Within the span of a year, Byju’s has witnessed a staggering 62% decline in its overall worth.

BlackRock, as a publicly traded company, is required to disclose the market valuations of its unlisted portfolio companies on a quarterly basis.

Before we delve into the factors contributing to the decline in Byju’s valuation over the course of the last one and a half years, let’s take a closer look at Byju’s funding endeavours over the past year.

Byju’s Fundraising 2022-2023

In March 2022, Byju’s received a significant boost when the co-founder and chief executive, Byju Raveendran, personally invested $400 million into the company. This investment was part of a larger funding round of $800 million, with participation from Sumeru Ventures, Vitruvian Partners, and BlackRock, among others. Although the specific details of the round were not disclosed, it resulted in Byju’s valuation of approximately $22 billion.

On October 17, 2022, Byju’s soared higher as existing investors and the Qatar Investment Authority injected another $250 million into the company, maintaining the same sky-high valuation of $22 billion. The investors saw the potential and believed in Byju’s mission to revolutionize education.

On October 27, 2022, Byju’s made an intriguing move by securing an unsecured loan worth ₹3 billion from its subsidiary, Aakash Educational Services. The loan was intended to support Byju’s “principal business activities,” adding an element of intrigue to the company’s financial operations.

In March 2023, Blackrock halved Byju’s valuation to $11.5 billion, leaving many spectators wide-eyed. However, despite this significant devaluation, Byju’s managed to defy the odds and keep its fundraising momentum going strong. Remarkably, the company continued to attract investments at its previous valuation of $22 billion.

In May 2023, Byju’s secured $250 million in debt funding from investment firm Davidson Kempner, based in New York. Additionally, the company is currently in discussions to raise an additional $700 million as part of a massive $1 billion funding round, at the valuation of $22 billion.

Investors Taking A Swipe at Byju’s Valuation?

Despite Byju’s remarkable achievement as India’s most valuable startup, its journey has been anything but smooth sailing. The company consistently finds itself in the spotlight, not only for its soaring revenue but also for the staggering losses, employee layoffs, raids by the Enforcement Directorate (ED), and a plethora of other activities.

Byju’s financial results

The financial rollercoaster of Byju’s is a gripping tale in itself. In FY18, the edtech company reported ₹490 crore in revenue while the losses were ₹29 crore. In just two years, Byju’s revenue and loss soared to ₹2,189 crore and ₹305 crore, respectively.

Surprisingly, in FY21, Byju’s emerged as India’s top loss-making unicorn, surpassing Flipkart, OYO and Udaan. The company’s revenue from operations grew only 4% YoY to ₹2,280 crore, while losses ballooned 14.9X to ₹4,564 crore during the fiscal year ended March 31, 2021. Concurrently, the company’s total expenses witnessed an astronomical 2.4-fold increase, soaring to ₹7,027 crore.

Notably, Byju’s took a significant hit by writing off approximately ₹816 crore as the cost of intangible assets under development, a crucial factor to consider. If this cost were to be included, expenses would have skyrocketed to a staggering ₹7,843 crore, with losses surpassing the threshold of ₹5,380 crore for FY21.

It is important to note that Byju’s has not yet filed its financial reports for FY22 and FY23 with the Ministry of Corporate Affairs.

Byjy’s layoffs

Byju’s made headlines in July 2021 when it acquired Toppr, an ed-tech startup. However, in a rather unfortunate turn of events, the startup couldn’t manage to grow due to the impact of the Covid-19 pandemic. These difficulties translated into a 13.1% year-on-year increase in Byju’s Toppr annual losses, which amounted to ₹128.3 crore in FY21. Regrettably, Toppr reportedly laid off more than 300 employees in mid-2022.

In October 2022, Byju’s faced another round of layoffs, reportedly resulting in the termination of approximately 2,500 employees or 5% of its workforce. This news sent shockwaves through the industry and raised concerns about the company’s workforce and overall stability.

In February 2023, Byju’s undertook another round of layoffs, resulting in the dismissal of over 1,000 employees. What set this round of layoffs apart was that instead of officially terminating their employment, the company asked the majority of affected employees to resign abruptly. This approach to the layoff process raised eyebrows and added to the ongoing concerns surrounding the company’s workforce management practices.

ED raids Byju

In April 2023, the Enforcement Directorate (ED) raided the premises of Raveendran Byju and his company Byju’s (parent Think & Learn Private Limited), under the provisions Foreign Exchange Management Act (FEMA).

The FEMA searches revealed that Byju’s had received foreign direct investment (FDI) amounting to a staggering ₹28,000 crore (Approx $3.4 billion) during the period from 2011 to 2023. Additionally, it was discovered that the Bengaluru-based ed-tech company had remitted approximately 33% of it, amounting to ₹9,754 crore ($1.22 billion) to various foreign jurisdictions in the name of overseas direct investment within the same period.

ICAI, NCPCR probes

In November 2022, the Institute of Chartered Accountants of India (ICAI) said to be looking into certain issues with Byju’s financial disclosures. This came after concerns were raised by Karti Chidambaram, a member of the Lok Sabha, regarding the company’s financials. The ICAI’s investigation aimed to assess the accuracy and transparency of Byju’s financial reporting.

In addition to the financial scrutiny, in December 2022, the National Commission for Protection of Child Rights (NCPCR) summoned Byju Raveendran, the founder of Byju’s, in response to allegations of malpractice by the company’s sales team.

Underperforming Acquisitions

In its quest to become a comprehensive educational platform, Byju’s has made several significant acquisitions, including WhiteHat Jr, Aakash Educational Services, Epic, Great Learning, and Toppr.

However, one of its biggest acquisitions, WhiteHat Jr, for which Byju’s paid $300 million, has posed significant challenges for the company. WhiteHat Jr has faced criticism and controversies, including allegations of misleading claims, poor teaching quality, and over-aggressive marketing strategies. These issues have not only tarnished the reputation of WhiteHat Jr but have also posed hurdles for Byju’s, impacting the overall performance of the acquired unit.

The struggles with WhiteHat Jr have likely led Byju’s to evaluate the future of the startup within its portfolio. The company is reportedly considering the possibility of shutting down WhiteHat Jr in order to address the challenges it presents and streamline its operations.

The declining valuation of Byju’s, a prominent edtech company, can be attributed to several other key factors as well. Firstly, the industry has witnessed intensified competition as more players enter the market, vying for market share and investor attention. Secondly, the evolving market dynamics and shifting consumer preferences have led investors to reassess the growth potential of companies like Byju’s. Additionally, regulatory hurdles in the education sector have created uncertainties and cautiousness among investors. Furthermore, the fear of recessions in developed economies has added to the cautious approach of investors, impacting their decisions regarding Byju’s valuation.

These combined factors have contributed to a sense of scepticism surrounding Byju’s future growth prospects and overall valuation, prompting investors to exercise prudence in their investment strategies.

In a nutshell

BlackRock’s decision to cut Byju’s valuation could be influenced by the strained relationship with edutech decacorn (A startup with over $10 billion valuation) in the recent past. It all started with the acquisition of Aakash by Byju’s in April 2021 for $950 million. BlackRock was one of the early investors in Aakash and held a 38% stake in it at the time when Byju’s acquired it. However, Byju’s started deferring the payment to BlackRock against its holding in Aakash. Initially, the company was expected to settle the outstanding amount of ₹1,983 core (US$234 million) by June 2022. However, the company continued to postpone the timeline for the payment before settling it finally on September 23, 2022, with a delay of over a year.

Despite the controversies and challenges faced by Byju’s, the company has been able to raise a considerable amount of money at a staggering valuation. Byju’s has been successful in attracting investments from various sources, including venture capital firms, private equity investors, and strategic partners, amidst the reports of tough economic conditions and accusations of financial irregularities. These funds have, so far, played a crucial role in supporting the company’s growth and expansion efforts.

Amid the challenges related to funding and valuation, reports indicate that Byju’s is considering an initial public offering (IPO) soon. An IPO would allow the startup to offer shares to the public and potentially raise additional capital for its operations and future plans.

All said and done; it’s important to note that valuation fluctuations are not uncommon in the startup ecosystem, and it remains to be seen how Byju’s will adapt and innovate to regain its momentum in the ever-evolving edtech landscape.


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