BYJU’s Case Study: History, Downfall, Acquisitions, Highlights, and Road Ahead

BYJU’s, a once-established Indian education technology giant, has recently witnessed a dramatic downfall. Our today’s blog explores the factors contributing to its struggles, offering insights into the complexities of the ed-tech company and much more.

BYJU’s began as an offline coaching centre. It gained popularity through engaging and personalised learning methods and eventually ventured into the online space with a mobile app. The company’s success was majorly attributed to effective marketing by celebrities, a focus on technology, and strategic acquisitions.

BYJU’s employs a global workforce of over 10,000 individuals, with over 2,500 highly qualified educators and learning science experts dedicated to curriculum research and development.

History of BYJU’s

BYJU’s story began with Byju Raveendran, an engineer who started teaching mathematics to students in 2006. In 2011, Raveendran, Divya Gokulnath (wife), and others established Think and Learn Private Limited., the company behind BYJU’s. The company initially focused on offline coaching but quickly recognised the potential of online learning.

BYJU’s entered the Deloitte Technology Fast 50 India and Asia Pacific rankings in 2012, showcasing its early promise. 2015 marked the turning point with the launch of BYJU’s Learning App, which offered video-based learning programmes for K-12 and competitive exams.

Reasons for Downfall

BYJU’s has faced several corporate governance issues in recent years, resulting in current financial struggles. Some of them are listed below,

1. BYJU’s strategy involved rapid expansion through acquisitions and heavy investments in marketing. This fuelled its initial success but also led to a mountain of debt.
2. The company poured resources into celebrity endorsements and creating a solid brand image but should have built a financially sustainable business model.
3. A lack of transparency in financial reporting and concerns about inflated valuations eroded the people’s confidence. The company’s auditor resigned in 2023, raising the red flags.
4. With schools reopening after the pandemic, the trend of online learning faded and led to BYJU’s facing a decline in demand.
5. The company was accused of aggressive sales tactics, pressuring parents into costly subscriptions. This damaged BYJU’s image and created customer dissatisfaction.
6. BYJU’s model heavily depended on internet access, which is not available everywhere in India. Additionally, the ed-tech startup became increasingly crowded with competitors, making it harder for it to stand out.
7. Mounting debt and deteriorating revenue streams pushed BYJU into a difficult financial position. The company resorted to cost-cutting measures like layoffs and asset sales.
8. With concerns about financial health and ethical practices, investors grew wary. BYJU’s valuation plunged from a peak of $22 billion to a fraction of that.
9. A recent report alleges that frontline staff at BYJU were expected to work long hours, exceeding standard work weeks and faced pressure to meet sales targets. In some instances, certain representatives resorted to questionable practices, such as involving family and friends in purchases that were later cancelled and misrepresenting customer payment status to lenders.
10. Additionally, there were reports in February 2024, regarding the expulsion of BYJU’s Raveendran, the founder and current CEO, by 60% of the company’s shareholders. However, the CEO refuted this claim, clarifying that there were no changes in the company’s management. This vote was invalid as it did not adhere to proper procedures because the existing shareholder agreement does not grant such removal power.

Acquisitions

The company is known for its aggressive acquisition strategy, specifically in the years 2021 and 2022. Some of the major acquisitions by the company are as follows

1. White Hat Jr.- a U.S.-based company, offered live online coding classes for children. (August 2020)
2. Great Learning –  is an Indian platform focusing on professional upskilling and reskilling. (April 2021)
3. Aakash Educational Services – an Indian chain of coaching centres for competitive exams, was acquired. (April 2022).
4. Epic – is a US-based digital children’s library platform (July 2021)
5. Osmo – a US-based company offering educational games for children in January 2019.
6. TutorVista and Edurite – They are Indian companies providing online tutoring and educational content. (July 2017)

The acquisitions initially boosted BYJU’s growth and diversification, but concerns arose about heavy debt burden, operational inefficiencies, and an impact on organic growth.

Highlights

Let us have a quick insight into the company’s key highlights and how it slumped over the past few years. 

1. BYJU’s K-12 education business surged in FY 2022, contributing significantly to the company’s gross revenue of nearly INR 10,000 crore. Notably, they generated INR 4,530 crore in just the first four months (April-July).
2. While BYJU’s group revenue for FY 2021 showed growth when compared to FY 20 at INR 2,428 crore, a significant change in revenue recognition due to the pandemic resulted in nearly 40% of earned revenue being deferred to future fiscal years.
3. As of January 2024, BYJU’s valuation has dropped to approximately USD 1 Billion, reflecting a staggering 95% drop from its peak of USD 22 Billions in FY 2022. 

Did You Know?

The Central Consumer Protection Authority (CCPA) imposed a fine of INR 10 lakh in November 2022 for allegedly misleading advertisements related to IAS. However, BYJU’s disagreed with the order. In response to a query, the company’s official stated “We note that CCPA has levied fines on numerous education/ed-tech institutions in this matter. We respectfully disagree with the findings in the order and intend to appeal the same as we believe that the advertisements are not misleading.”

Road Ahead

BYJUs is currently undergoing a major restructuring to regain its footing. Below are some of the key changes that the company must go through,

1. Regaining customer confidence requires transparency, ethical practices and a sustainable business model.
2. BYJU’s needs to innovate and offer solutions that cater to the evolving needs of the students as well as parents in a competitive landscape.
3. The company must find a way to manage its debt burden without compromising its core business operations.

Conclusion

The story of BYJU’s downfall serves as a cautionary tale for similar high-growth ed-tech startups. While rapid expansion can be tempting, focusing on and emphasising financial growth and valuations, ethical conduct, and long-term sustainability are essential for the company’s lasting success.

To wrap it up, the company’s founder had set the stage for its current status by opting for a meteoric rise instead of focusing on social good. However, the founder now seems willing to make significant changes to get the company closer to its peak valuation. 

Frequently Asked Questions (FAQs)

1.  How did BYJU initially gain recognition?

Ans. The company started as a modest offline coaching centre and became the world’s most valuable ed-tech startup company via its innovative mobile application usage.

2.  What is BYJU’s current condition?

Ans. BYJU’s is undergoing a major restructuring, including layoffs, asset sales, and a shift towards a more sustainable business model.

3.  What is the future outlook for BYJU’s?

Ans. The future is uncertain. Regaining investor confidence, recreating brand image, and managing debt are some of the challenges the company faces in the upcoming years.

4.  What lessons can we learn from BYJU’s story?

Ans. The case study highlights the importance of balancing growth with financial responsibility.

5.  Were there any concerns about BYJU’s sales practices?

Ans. Yes, there were allegations of high-pressure sales tactics used to pressure parents into buying expensive subscriptions.

Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.