Net Losses For Byju’s Mounted To Rs. 4,588 Crore For Fiscal Year 21
When Byju Raveendran and Divya Gokulnath founded BYJU’s in 2011, the idea was to transform the education sector in India and put the country at the forefront of the global EdTech race. The country’s largest EdTech company witnessed exponential growth during the first few years. But featuring on the Indian cricket team’s jersey or acquiring smaller startups in the space has done little good for the company besides strengthening the brand value. Despite so many high-value partnership, the financial leadership has failed to check the widening losses for Byju’s.
As Byju’s mulls deferring its IPO, experts are raising concerns over the company’s business model. Despite numerous acquisitions and partnerships, the EdTech giant suffered losses worth Rs. 4,588 crores for fiscal year 21, 19 times more than the previous fiscal year. Increasing losses despite a substantial rise in revenue raise concerns about the company’s business model. The revenue for Byju’s reached Rs. 10,000 crores for fiscal 22. However, the edtech giant failed to disclose profit or loss for the same fiscal. With so many hidden numbers, decoding the platform’s performance becomes a task. So what makes India’s highest-valued start-up a matter of public attention?
Where Does Byju’s Stand In Terms Of Public Acceptance?
As far as use-case is concerned, Byju’s still has a solid market hold. In a survey by YouGov, 65% of parents said their children used Byju’s for education.
Source: Statista
With 40 million overall users (3 million paid users), and an annual retention rate of nearly 85%, it is certainly the most successful educational platform in the country. However, there seems to be some trouble in paradise.
Widening Losses Exposing Revenue-Expenditure Mismatch
From reporting flat revenues to witnessing a 20-fold increase in losses, fiscal 21 has been really poor for the platform in terms of financial performance. And the future looks uncertain as well. Like any other consumer business, the primary goal of Byju’s is making money, and it is failing to do so. According to the Companies Act 2013, every company must conduct an audit of its financial accounts and submit the results to the Ministry of Corporate Affairs. Byju’s did that too but after a delay of 18 months. As per the report submitted by the platform, it had revenues of Rs.2,428 crores against losses of Rs.4,588 crores for fiscal 2020-21. Compared to fiscal 2019-20, the losses for Byju’s are fifteen times higher.
Source: Economic Times
In a statement to PTI, CEO Byju Raveendran held deferment of some revenue and losses from WhiteHat Jr. responsible for widening losses.
“These two are significant changes which have pushed out or deferred revenues of almost more than 40%. When you take a look at the financials, you will see there is no growth from FY20 to FY21,” he said.
“Plus, there have been acquisitions which were fast-growing but loss-making acquisitions like WhiteHat Jr., because losses have increased from almost a break-even to ₹4,500 crore in FY21,” Raveendra further explained.
However, the Byju’s CEO argued that the platform has shown accelerated growth from FY21 to FY22. Riding on acquisitions, the company’s core business grew 150%. He correctly pointed out that Byju’s closed FY22 at a gross revenue of Rs. 10,000 crore. According to Raveendra, the company is advanced stages of discussions for raising $500 million. Whether the funding can minimize the impact of mounting losses for Byju’s? Only time will tell.
Byju’s On A Purchase Spree
Byju’s has become the whale that it is, by acquiring all the small fishes in the game. WhitHat Jr. is one of those companies. For the past few years, Byju’s has been on an acquisition spree. Here are the key acquisitions by the edtech giant:
- Data-driven platform Vidyartha
- TutorVista and Edurite from Pearson
- Math Adventures
- WhiteHat Jr.
- Osmo
- LabInApp
- HashLearn
- Scholr
- Aakash Education
- Epic
- Great Learning
- Gradeup
- Tynker
Are all of these acquisitions profitable? No. Let’s take the case of WhiteHat Jr. It is a platform that teaches people coding online. Byju’s acquired WhiteHat Jr. for $300 million. And CEO Raveendran sees it as one of the major reasons behind widening losses in FY21.
Pandemic Buyouts Amid Mounting Losses A Disaster?
Byju’s acquired educational platforms outside India as well. The goal must have been to emerge as the biggest EdTech platform globally. At a time when businesses were struggling due to the pandemic-induced crisis, Byju’s saw an opportunity in the crisis and went on a purchasing spree, spending millions of dollars in buyouts. Was this strategy a failure? Well, results may vary in the long-term and short-term, but widening losses attributed to subsidiary firms certainly add weight to the argument.
How Big Is The Crisis?
Financial advisors at Byju’s are up for tough times ahead. The financial crisis of the platform attracted public attention after its investors Oxshott and Sumeru Ventures failed to come up with $300 million after a round of fundraising. The company has another financial hurdle to cross. It is reportedly struggling to pay Blackstone Rs 1,983 crores for the Aakash deal. The payment’s due date was in June and we are already in September.
The company’s auditor Deloitte Haskins and Sells seek two key changes in the financials. These two changes are:
- a change in the manner of revenue recognition;
- and changing the accounting of interest paid by Byju’s to its lending partners.
The auditor refused to sign off the financial results without these changes. This itself tells a story. At a time when Byju’s is reeling under widening losses, it plans to invest Rs. 1,000 crore to expand its physical classroom footprint in India. With the IPO already deferred, the company will have to make major adjustments to accommodate this new requirement. Mitigating risks and minimizing losses at a time when the company is eyeing further expansion is going to take a mammoth effort. For now, a crisis seems inevitable!