It seems there may not be an immediate end to Byju's woes. Media reports state that Byju Raveendran, the founder, broke down in tears after the Enforcement Directorate raided the company's offices, linking it to possible foreign exchange violations. The company has been facing a series of crises including allegations of financial irregularities and legal battles. Byju's had recently shut its largest office space in Bengaluru’s Kalyani Tech Park as part of cost-cutting measures. The office space was spread across an area of 5.58 lakh square feet.
Experts with whom THE WEEK spoke to feel that Byju's is going through an existential crisis and that it's a clear case of growing too big and too fast without a strong foundation in place. In B2C businesses, one needs to have the pulse of the customer and here it touches something India has always valued—education.
“In education it is your value rather than valuation which matters. Unless the company raises a lot of money in the near term (which seems almost impossible) it would be very difficult for it to survive. It is very difficult for any company to survive by cost management. Unfortunately in Byju's case, the revenues don't seem to be in sight as well,” Satya Pramod, Founder and CEO, Kayess Square Consulting Private Limited, told THE WEEK.
He points out that with so many issues pulling the company down, it seems almost impossible for it to come out of the pit. “The company needs urgent infusion of cash to change the negative image currently and they should agree to down rounds as well since it is about the company, its customers and employees now more than it is about the investors. The company has to look at all three in tandem, focus on revenues and grow, optimize costs and also raise capital. It is not easy to do all the three together, but if a company could grow so fast, it can also find the resilience in its management, board, investors and also its employees,” added Pramod.
The rapid growth and success has undoubtedly attracted a significant influx of investors and moreover the EdTech sector was the darling of the investor community. “The turn of events at Byju's have been unfortunate. It is essential for any company and its top leaders to prioritise building and maintaining the trust of their investors. Transparent communication and upholding corporate governance are pivotal in this regard. We have seen companies who have neglected this aspect have eroded shareholder value. One has to navigate through the challenging phase when it happens. There are no shortcuts here; one has to rebuild the trust and confidence of the stakeholders, especially since the prospects for the sector continue to remain bright,” remarked Aditya Narayan Mishra, MD and CEO of CIEL HR.
The company has been trying to deal with the situation one at a time. As per Byju's spokesperson, the company has no pending PF dues. “We would like to reconfirm that all PF dues have been cleared till June 2023 for our employees. There have been a few authentication issues which are being currently worked on with the employees and the PF department,” said BYJU'S spokesperson.
Prosus N.V., an investor in Byju's had said that the company's reporting and governance structure did not evolve sufficiently for a company of that scale and it "regularly disregarded advice" despite repeated efforts by the Dutch-listed technology firm's former director. Prosus had slashed the valuation of Byju's to $ 5.1 billion from $ 22 billion last year. The company had said that the decision for its director to step down from Byju's board last month was mainly because he was unable to fulfil his fiduciary duty to serve the long-term interests of the company and its stakeholders.
“In the recent past, many of Byju's investors have expressed trenchant criticism as to how business is taking shape. But on the other hand, Byju's management has turned recalcitrant. It is a sign that things will go downhill before things get better,” remarked Alok Shende of Mumbai-based Ascentius Consulting.
The present crisis at Byju's is not surprising as the EdTech companies overestimated the future prospects of their products and are now coming to terms with the reality of phygital environment. Beside the money from the PEs, the companies have leveraged debt to finance their operations. All EdTech companies have been facing challenges of revenue flow and hence are under stress to optimise their operations. Hence they have shut down projects and been pressing the pedal to the maximum limit on sales and marketing.
