Byju’s- a prominent Indian education technology startup- is facing a slew of problems. On Tuesday (June 27), a Delaware court rejected a request by Byju’s Term Loan B lenders to probe into a $500 million transfer from its US-based subsidiary Byju’s Alpha to other entities. The startup’s valuation in Prosus NV has dropped to $5.1 billion. And last Friday (June 23), all three global investors at Byju’s confirmed that their representatives had resigned from the board.
These are just a few of the issues that Byju’s is dealing with and the overall situation at the ed-tech startup remains uncertain. So what has gone wrong with Byju’s in recent days?
What has happened with Byju’s recently?
> On Tuesday, a lawyer representing Byju’s told news agency Reuters that the startup had made up a shortfall in payments to a national pension fund. Byju’s is currently battling a US lawsuit over a $1.2 billion loan. The lawyer’s remark came after sources from India’s labour ministry told Reuters that the Employees Provident Fund Organisation (EPFO) identified a shortfall in payments from Byju’s for August 2022 to May this year.
The sources said the startup deposited $15 million after a directive issued by the EPFO, and the remaining balance would be deposited in a couple of days.
> The above development comes as a Delaware court on Tuesday rejected a request by Byju’s Term Loan B lenders to probe into a $500 million transfer from Byju’s Alpha to other entities, the news agency PTI reported citing sources. Byju’s denied the allegations levelled by its $1.2 billion Term Loan B lenders, saying it never defaulted on payments.
> A report by the news agency Bloomberg on Tuesday said that Byju’s was in talks with potential new shareholders to raise $1 billion in funding. Sources told Bloomberg that the startup was offering benefits like preferential treatment in the case of liquidation to the potential investors-an option that none of its existing shareholders has.
> Last week, Byju’s lost board members representing three global investors- Peak XV, Prosus NV, and the Chan-Zuckerberg Initiative. Byju’s auditor Deloitte also severed ties with the company.
> Peak XV, Prosus NV, and the Chan-Zuckerberg Initiative did not give reasons for stepping down. However, Deloitte said it was resigning from Byju’s as the company had delayed financial statements for the year ending March 31, 2022. Deloitte also said that it did not receive the necessary documents even after writing several letters to the board. Byju’s has now appointed BDO as its new auditor.
> Following the above resignations, Byju’s told its investors it would file 2022 audited earnings by September this year and 2023 results by December this year, Reuters reported last Sunday citing a person familiar with developments.
> In recent months, the company’s investors cut their valuation estimates. Blackrock, for example, slashed its internal valuation of Byju’s by more than 60% to $8.2 billion, disclosures showed, Reuters also reported.
What is Byju’s?
Byju’s claims that it is the world’s largest education technology company. It offers courses in mathematics, physics and chemistry for school students and also offers courses on competitive examinations conducted in India.
As students worldwide shifted to the online mode of teaching due to the Covid pandemic, Byju’s valuation shot up from $5 billion before the pandemic to $22 billion last year. However, the company’s growth slowed as the effect of the pandemic reduced and students resumed offline classes.
Byju’s is run by its founder Byju Raveendran, and his wife, Divya Gokulnath. Raveendran launched the startup in 2011 and its app in 2015.
The layoffs
Last week, Byju’s initiated a fresh round of layoffs which would impact around 500-1,000 full-time employees across the companies departments, according to a report by the Times of India. This comes after around 2,500 employees were laid off in October last year. The report said that the current layoffs would affect employees across sales, marketing, product and other teams.
Several employees are uncertain about their future due to the recent job cuts. “Morale is at an all-time low. Literally, every person has a job portal open on their laptop at all times. Everyone wants to leave desperately before they are asked to pack up overnight,” a senior manager at Byju’s, who chose to remain anonymous, told Reuters on Sunday.
“Right now the situation is so dismal, subordinates are sitting with their managers and job hunting,” the manager added. Other employees, who also chose to remain anonymous, said they received no memos about the exit of Deloitte and the board members. Two other employees told the news agency that performance incentives, bonuses and appraisals were stalled amid the turmoil.
Byju’s response
Last Friday, Byju’s defended its governance practices and business, saying it is fixing and improving them. Playing down Blackrock’s valuation cut, Byju’s said that Blackrock was a minor shareholder with less than 1% of the company, Reuters reported. The ed-tech startup also dismissed concerns over the job cuts, saying that while it did lay some people off, it hired more.
(With inputs from agencies)
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