Byju’s, India’s once most valued edtech startup in the world, appears to be nearing its end as it grapples with a severe cash crunch. To navigate these troubled waters, the edtech giant is leaving no stone unturned, exploring unconventional measures such as pledging personal assets, borrowing from family and friends, and even considering the sale of its prized unit, Epic, to secure desperately needed funds.
In a strategic move, Byju’s is diverting a portion of the anticipated proceeds from the sale of Epic to sustain operations at its core platform, Think & Learn. The stakes are high, with three bids already on the table, totalling approximately $400 million. However, the company must tread carefully, earmarking $80-100 million from the transaction for immediate financial relief while preserving the remainder for term loan B (TLB) lenders. The success of this intricate financial manoeuvre hinges on the speed at which the Epic deal is finalized and funds are seamlessly transferred.
“At this point, the company needs money. There is a conversation underway with TLB creditors over the Epic sale proceeds and the understanding is about $300-320 million would be reserved for them (lenders),” a person aware of the matter said.
Simultaneously, Byju’s is on a multifaceted quest for additional financing, contemplating adjustments like reducing notice periods to streamline operations.
Over the weekend, Byju’s communicated to its employees that it is revising the notice period for all staff members from 15-60 days to 15-30 days, depending on their seniority. For individuals classified under Level 1 to 3, encompassing executives, associates, specialists, senior executives, senior associates, senior specialists, and team leads, the new notice period would be 15 days. Meanwhile, for those at Level 4 and above, the notice period would be extended to 30 days. ET has reviewed a copy of the email outlining these changes.
In September, under the leadership of its newly-appointed India CEO, Arjun Mohan, Byju’s initiated a restructuring process that eliminated at least 4,500 jobs. Currently, Think & Learn is estimated to have around 13,000-14,000 employees.
Byju’s CEO Pledging Personal Assets
With an urgent need for 500-600 crore by March to settle pending dues to employees, vendors, tax authorities, and the Board of Control for Cricket in India (BCCI), Byju’s CEO finds himself orchestrating a complex financial juggling act.
Sources, requesting anonymity, reveal that the CEO, Byju Raveendran, has resorted to borrowing from family, friends, and fellow entrepreneurs in recent months to meet payroll and vendor obligations. The company reportedly faces a monthly shortfall of Rs 60-70 crore despite successfully reducing costs. For instance, the annual wage bill, which stood at over Rs 300 crore a year ago, has now been trimmed to Rs 130 crore.
In an effort to secure funds, Byju Raveendran has gone to the extent of pledging his residence. Specifically, two homes belonging to his family in Bengaluru and his under-construction villa in Epsilon – a high-end gated community in the city – were offered as collateral to borrow $12 million. The funds obtained from this arrangement were used to pay salaries to 15,000 employees in Byju’s parent firm, Think & Learn Pvt.
Byju Raveendran has been transparent with its investors regarding the business challenges. However, according to a report by Moneycontrol, he remains optimistic about overcoming the liquidity crunch without seeking assistance from investors. A source disclosed that the CEO has injected funds into the company over the last eight to nine months to ensure its financial stability and continuity.
Byju’s is taking urgent measures to maintain financial stability, coinciding with the upcoming annual general meeting scheduled for December 20. Reports from ET on November 29 indicated that investors had put forth demands, including the founder, Byju Raveendran, stepping back from daily operations. The AGM agenda includes discussions on approving audited FY22 financials, appointing MSKA & Associates as statutory auditors for a five-year term, and a special discussion on approving a remuneration of Rs 5,00,000 for each of the financial years 2021-22, 2022-23, and 2023-24 for B Y & Associates, the cost auditors.
During the peak of the edtech boom driven by funding and the pandemic in 2020-2021, Byju’s aggressively raised funds and engaged in numerous acquisitions. The company made 22 acquisitions in India and overseas, aiming to broaden its scope from K-12 education to encompass categories such as test preparation, higher learning, and coding. Presently, Byju’s is looking to monetize some of these acquired assets to generate funds and sustain its core edtech operations in India.
Other Troubles for Byju’s
On November 21, the Enforcement Directorate (ED) issued show cause notices to Byju’s and its founder Byju Raveendran, citing violations involving an amount of Rs 9,362.35 crore under the Foreign Exchange Management Act (FEMA). A week later, the company released a statement asserting its commitment to complete adherence to FEMA regulations.
In a separate development, Byju’s has become embroiled in a legal dispute with the Board of Control for Cricket (BCCI) in India over a sponsorship payment disagreement. The BCCI filed a corporate insolvency plea against Byju’s for allegedly defaulting on a payment of Rs 158 crore. The matter is scheduled to be heard on December 22, and the tribunal has issued a notice to Byju’s, requesting the company to file its reply within two weeks.
Due to all the controversies and financial challenges faced by Byju’s over the past two years, major investors, including Prosus and BlackRock, have significantly reduced its valuation. Prosus slashed Byju’s valuation from $22 billion in early January 2022, to less than $3 billion in November 2023. Meanwhile, BlackRock also marked down the valuation of Byju’s on multiple occasions, with the lowest reported valuation dipping just above $8 billion.
