Top 5 Reasons Behind Byju's Dramatic Downfall From $22 Billion to Under $3 Billion in Just One Year
Byju’s, once a darling of investors, has seen its valuation plummet by an astonishing 86% in just one year, dropping from $22 billion to less than $3 billion. This decline can be attributed to several critical factors:
1. Aggressive Acquisition Strategy
After the surge in online learning due to the pandemic, Byju’s embarked on an ambitious acquisition spree to expand its portfolio, acquiring both domestic and international competitors. Notable purchases included WhiteHat Jr. and Great Learning, with the WhiteHat Jr. acquisition alone costing around $1 billion. However, this strategy left Byju’s with debts exceeding $1.2 billion, far surpassing its revenue-generating capabilities.
2. Post-Pandemic EdTech Slowdown
As students returned to physical classrooms post-pandemic, the entire edtech sector experienced a slowdown. Byju’s reliance on online learning significantly hampered its growth, leading to substantial losses. For instance, its financial statements for 2021-22 revealed a staggering loss of ₹5,592 crore, a sharp increase from ₹2,428 crore in the previous year.
3. Mounting Debts
In addition to acquisition-related debts, Byju’s faced escalating financial burdens due to costly marketing campaigns that included high-profile sponsorships and celebrity endorsements. Combined with the slowdown in demand after the pandemic, these factors contributed to a growing debt crisis.
4. Legal Challenges
Byju’s encountered serious legal issues, including lawsuits from creditors over loan defaults, which initiated insolvency proceedings. Notable disputes arose between the Board of Control for Cricket in India (BCCI) and the US-based loan administrator Glas Trust, both vying for priority in repayment. Other vendors have also entered the fray.
5. Transparency Issues and Internal Conflicts
The company faced significant erosion of investor trust after delaying its financial reports for 2021-22 by nearly a year. Additionally, resignations among its auditor and key executives exacerbated the situation. Reports surfaced of a high-pressure sales culture with unrealistic targets, leading to allegations of aggressive tactics, harassment, and misrepresentation of products. This not only resulted in high employee turnover but also affected customer relations, with parents reporting undue pressure to purchase unaffordable subscriptions.
