Byju’s failure to publish the account caused the edtech giant to monitor

Byju’s, India’s most valuable start-up, is under intense scrutiny from the government, investors and creditors for repeatedly failing to disclose its accounts, as funding and revenue dry up. The field of educational technology is booming for a while.

The online tutoring company has benefited from Covid’s stay-at-home restrictions and is valued at $22 billion, after raising nearly $6 billion from investors in multiple rounds, including from leading private equity firms like General Atlantic and Tiger Global. It also borrowed $1.8 billion.

However, the Bangalore-headquartered startup has yet to receive at least $250 million in funding from two investors, according to people with knowledge of the matter.

It also failed to meet its own deadline to submit results for the financial year ending March 2021. India’s Ministry of Corporate Affairs last month asked the company to explain the delay. almost 18 months late. The department did not respond to a request for comment on Byju’s non-compliance.

Byju’s has repeatedly said its auditor, Deloitte, failed to sign off on its accounts because of the complexities of reporting more than $1.1 billion in acquisitions the company has made over the years. fiscal year 2021. Two investors contacted by the Financial Times asked questions about rapid international expansion and aggressive acquisition strategy.

The educational technology sector is being hit particularly hard as India and other countries emerge from the pandemic and students return to physical schools. Byju’s has cut staff and budgets this year in many areas, former and current employees said, although the company said it continues to be a “net tenant”.

“It’s not just Byju’s, other [edtech] players like Unacademy and Whitehat Jr felt the impact as we opened up and people went back to offline schools,” said Neha Singh, co-founder of Indian data provider Tracxn. Whitehat Jr was acquired by Byju’s in July 2020.

At the end of December last year, Byju was reported to be are talking to public in the US by combining with a white check firm, or Spac, led by Churchill Capital of Michael Klein, in a deal that could value the business more than $40 billion.

Sentiment towards Spaces, and startups, has changed markedly since then. Tracxn data shows funding for Indian startups hit a record high of $14.8 billion in the third quarter of 2021. But three-quarters of the decline followed after economic conditions worsened , with Q2 2022 receiving just $6.8 billion in funding – a 31% decrease from a year earlier.

In an unusual move, copperFounder Byju Raveendran financial lead for his company most recent funding round with a personal investment.

Like many startups, Byju’s parent company, Think & Learn Private Limited, is not turning a profit. Its most recently available accounts, for the financial year ending March 2020, lost Rs 2.6 billion ($32.5 million). Its main source of revenue is “selling educational tablets and SD cards”, valued at Rs 16.8 billion.

The market and creditors are becoming concerned about the lack of updates on its performance. According to Bloomberg data, the $1.2 billion loan the company raised in November was trading at just 69 cents against the dollar on Wednesday following a sell-off that began in April but has accelerated in the past few months. this week, according to Bloomberg data.

Raveendran, a respected former teacher, became one of India’s youngest billionaires when the value of the company he founded in 2011 skyrocketed. Byju’s start offering pre-recorded English lessons in India and then rapidly expanding across Southeast Asia, America and Latin America, and acquired 20 edtech startups in India and abroad, according to Tracxn.

The pursuit of growth has paid off by increasing the value of the company, with the latest funding round in March placing it at $22 billion, compared with just $5.5 billion before the big day. Translated in mid-2019.

However, two investors have expressed concern about the number of acquisitions, speculating that Byju’s is trying to “buy in revenue” to justify its high valuation as the pandemic wave eases and demand decreases.

“I’m not sure why they need to make so many acquisitions. I think the core business can work well in India, I’m not sure if their model will work overseas,” said an unnamed investor when discussing a company. invest.

“Build or Buy” is a question a company of our size must evaluate as we enter a new segment or geographic area,” Byju’s told the Financial Times. at Osmo, an educational game company they acquired, has grown fivefold since the acquisition three years ago.

But after Byju’s funding failed to materialize this year, a former operations executive said budgets had been cut by more than 50% in some cases and international expansion had shrunk – with dozens of employees working on the initiative in India being fired with little warning.

Byju’s said claims of mass layoffs were “inaccurate”. “Although there have been some cuts in some departments, there has also been a large increase in hiring in many other departments,” it said, adding that it employed 3,000 people in the past year. .

The startup said it expects to release “annual financial results next week,” and that first-quarter revenue for the current fiscal year was up 50% year-over-year. It argues that it has insulated itself from the online downturn by diversifying into in-person classes and courses through its Aakash subsidiary.

“While pure edtech players are seeing a correction following the rise of the pandemic, holistic education majors like Byju are experiencing continued growth,” it said. speak.

Additional reporting by Jyotsna Singh in New Delhi and Robert Smith in London.

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