Byju Raveendran (File picture) | Photo: AFP
Byju Raveendran has a unique place in Malayali history. The 43-year-old engineer from Kannur is the first from Kerala -known as a state with low entrepreneurial tradition- to have built up within a decade a company that is not just India’s highest-valued startup but the world’s highest-valued education tech firm. In 2018, his company -BYJU’S- became a unicorn (valued at $1 billion), and in five years, it rose to be a decacorn ($10 billion). There are only 47 decacorn companies worldwide, and India has five. The other four Indian decacorns are Flipkart, Nykaa, Swiggy, and PhonePe.
However, after an incredibly meteoric rise, the renowned BYJU’S seems to be mired now in deep trouble. India’s most respected startup until recently, it is today haunted by a spate of crippling problems- inquiries into its functioning, layoffs, complaints of unethical selling practices, exploitation by consumers, allegedly inferior products, resignation of board members, investors losing confidence, delayed submission of financials, valuation dips, multi-million dollar legal battle with creditors and huge losses. Factors that ravaged the company appear to be the absence of corporate governance, flawed auditing, mad marketing extravaganza, and a profligate acquisition spree. The sudden breakout and the unbelievable frequency of the negative portents have also given way to suspicion of a conspiracy hatched by his business rivals envious of the South Indian villager’s fast and phenomenal journey.
Born in a Kannur village (Azhikode) in 1980 to school teacher parents, the young man who was good in maths and sports, studied in a Malayalam medium school and graduated from Kannur Government Engineering College. Though he passed CAT twice with 100 percentile, the determined youngster chucked his assured seat in the prestigious Indian Institute of Management, Ahmedabad, to chase his dream. Adept in teaching Maths like his mother, Byju launched an online math coaching business in Bengaluru in 2007 and four years later founded the new company Think & Learn with his wife, Divya Gokulnath who was his student. It was when Smartphones and the Covid pandemic changed the world beyond recognition and ushered, universally, the new era of online education. The right person at the right moment, the villager from Azhikode, became the wonderkind of India’s startup revolution.
BYJU’S (which is under the holding company Think & Learn) in a decade, attracted millions of consumers, investment funds worth Rs 28000 crores from global giants, acquired about 20 firms (including the three-decade-old Akash for $1 billion) spending $2.5 billion from around the world, and got valued at a whopping $ 22 billion. It then went on a marketing spree, becoming the official sponsor of the Indian cricket team, the primary sponsor of the FIFA World Cup 2022, and notched up celebrities like Shah Rukh Khan and even the world’s most expensive footballer, Lionel Messi as Brand Ambassadors. According to an estimate, the company spent Rs 2500 crore in 2021 alone, nearly the same as its revenues in the previous year. According to Forbes magazine’s list of Indian billionaires, the networth of Raveendran and his wife was $ 3.5 billion in 2020. Now BYJU’S is called a decacorn, meaning a company valued at over $10 billion. BYJU'S success is a case study at the Harvard School of Business.
But like in a typical Indian film in which the incredibly good days are followed in the next stage by the equally incredible bad days, BYJU’S second decade has now begun with terrible news breaking out daily. It began with the end of the pandemic and online-only businesses' decline. Parents of children who had bought the BYJU’S courses and tabs were the first to raise complaints. They griped about too expensive courses, “trapping” of buyers by exaggerated claims, other unethical practices, defective tabs, teachers not picking up calls or responding to emails, etc. Like the good word earlier, the bad word about the company too spread like fire, with parents taking to social media and Twitter with their protests and grievances. This followed dissatisfaction spreading among employees -Business Development Associates- who began moaning about abusive and exploitative working conditions, excessive workload, unrealistic targets, etc. Soon horror stories began to tumble down on layoffs. In November 2022, BYJU’Ss office at Technopark in Thiruvananthapuram, was tipped to be shut down. Thanks to Kerala’s tradition, this triggered widespread protests. Employees complained to the Left Democratic Front government, and Labour Minister V Sivankutty offered to intervene. Labour Secretary K. Latika spoke to Byju, who agreed not to shut down or lay off.
In December 2022, the company faced a significant blow to its image when Context, a media platform belonging to the Thomson Reuters Foundation, revealed a host of negativities haunting BYJU’S in a two-part investigative report. They ranged from its allegedly abusive and toxic work culture to unscrupulous sales practices and exploitation of consumers, especially the poor and vulnerable families. “Byju’s staff, many of whom are first-generation college graduates or come from low-income homes, say they put up with the punishing environment over fears of losing jobs in India’s tough labour market,” wrote Annie Banerji in Context after interviewing many employees and consumers.
The Context report triggered a damaging decision by the National Commission for Protection of Child Rights to issue summons to Byju over allegations of indulging in malpractices to lure parents (especially lower-class) and children into buying the company’s courses. Although Byju’s dismissed all the charges as baseless, the damage was done irreparably.
In April 2023, there was even more damaging news. The Enforcement Directorate initiated search in Byju’s house in Bengaluru in connection with alleged violations of the FEMA. This was related to the funding received from abroad. PTI reported that BYJU’s received Rs 28,000 cr between 2011-23. Though the global majors like Chan Zuckerberg and Sequoia etc., making a beeline to BYJU’S made positive headlines once, the same story turned sour.
Though the incessant flow of bad news gave cause to suspect some conspiracy by sulking business rivals, there were some unquestionable facts. The worst was the company’s illegal failure to submit the annual financial statements on time. The statement was delayed by 18 months in the financial year 2021, and the statement for 2022, meant to be submitted in September, is not ready even now. But when the delayed statement for 2021 was finally submitted, the underbelly was fully exposed. The year 2021 marked the company registering a stunning loss of Rs 2500 crore compared to Rs 305 crore in 2020 and a profit of Rs 20 crore in 2019. Though revenue rose from Rs 1281 crore to Rs 2280 crore during this period, expenditure zoomed from Rs 1321 crore to a whopping Rs 7027 crore! However, BYJU’s tried to explain the loss as temporary, caused only by a change in accounting technology and the cost of multiple acquisitions. It even claimed the year 2022 had been the company’s best growth year which would help reach a turnover of Rs 10,000 crore very soon. Divya Gokulnath even claimed 2022 as BYJU’s blockbuster year and only second to the Aliya Bhat- Ranbir Kapoor starrer Brahmastra!.
The latest blow to BYJU’S is the resignation of three directors from the board, which now has only Byju, Divya, and Riju. The directors who quit are GV Ravishankar of Sequoia Capital, Vivian Wu of Chan Zuckerberg, and Russell Dreisenstock of Prosus. The reason for their leaving is reported to be differences with the management. Coinciding with this came the severing of ties with the company by Deloitte Haskins & Sells, BYJU’S statutory auditors. BYJU’S has now engaged BDO as the new auditor. The Ministry of Corporate affairs has reportedly ordered a probe.
However, despite all the headwinds, Byju and the team appear confident to weather the rough seas soon. Even when troubles soared, BYJU’s raised $250 million in convertible notes from Davidson Kempner of the US in May 2023. BYJU’S has also made some other structural changes in functioning and to improve its image as a toxic company. Introduction of four-tier tech-driven internal sales replacing direct sales process, the “New Education for All” initiative to support 55 lakh students from low-income (less than Rs 25000 pm) families, etc are some of them.
Many observers believe that the damage suffered by BYJU’S would affect the entire world of Indian startups. Arindam Paul, the founder of Atomberg Tech, tweeted, “So sad…BYJU’s was the flagbearer of Indian tech and one of the most well-known Indian startups globally. If they fail, the India startup story, in the eyes of global investors, will have an impact”. Hope the youngster will soon bounce back.