Byju’s, once a shining star in the world of edtech, now finds itself in deep financial trouble. The company, which gained rapid popularity during the pandemic, has seen its valuation fall dramatically. Here are five major decisions that contributed to Byju’s current crisis.
1. Risky Acquisitions of Other Companies
Byju’s rapid expansion strategy involved acquiring multiple companies, including WhiteHat Junior and Great Learning. These acquisitions were made during the pandemic when online education was booming. Byju’s acquired WhiteHat Junior for nearly $1 billion, a decision that added over $1.2 billion in debt to the company. Unfortunately, this burden was far beyond its revenue generation, putting enormous pressure on the company’s financial health.
2. The End of the Pandemic Boom
The pandemic created a surge in demand for online education, which helped Byju’s grow rapidly. However, as the world returned to normal and students started going back to school, the need for online education plummeted. Byju’s was not able to adjust to this sudden change, leading to significant losses. The company reported a loss of ₹5,592 crore for the financial year 2021-22, compared to ₹2,428 crore the previous year. This decline marked the beginning of Byju’s financial troubles.
3. Soaring Debt
Byju’s debt problem continued to grow, especially after its acquisitions. The company further spent large sums on marketing, including big events and celebrity endorsements, which worsened its debt situation. These heavy expenditures did not translate into enough revenue to cover the costs, leaving Byju’s with a mountain of debt that it struggled to repay.
4. Legal Battles and Bankruptcy Threats
As Byju’s debt kept increasing, the company faced difficulty in paying back its loans. This led to creditors filing legal cases against the company. In some instances, bankruptcy proceedings were initiated as well. One of the company’s significant legal disputes is with the Board of Control for Cricket in India (BCCI). These legal troubles further tarnished Byju’s image and affected its financial standing.
5. Declining Product Quality and Delayed Financial Reporting
Internally, Byju’s faced significant issues with customer satisfaction. Several students and parents reported poor teaching quality and unsatisfactory experiences. Instead of addressing these concerns early on, Byju’s seemed to ignore them. Furthermore, the company delayed its financial reporting for FY 2021-22 by nearly a year, which damaged investor confidence. This lack of transparency added to the growing mistrust among stakeholders, further contributing to the company’s downfall.
Byju’s, once a leader in online education, has struggled to manage the challenges it created for itself. Through a series of costly acquisitions, mounting debt, legal troubles, and failure to adapt after the pandemic, the company now finds itself in serious financial distress.
