The rise and fall of Byju’s, once a startup darling in India
Signage at a Byju’s Tuition Center, operated by Think & Learn Pvt., in Mumbai, India, on Friday, Feb. 2, 2024. A unit of Byju’s, once one of India’s hottest tech startups, was put into bankruptcy in the US by a court-appointed agent who took over the shell company after it defaulted on $1.2 billion in debt. Photographer: Dhiraj Singh/Bloomberg via Getty Images
Dhiraj Singh | Bloomberg | Getty Images
Byju’s, once India’s most valuable startup, has seen a sharp reversal in its fortunes after a series of setbacks, including alleged accounting irregularities and purported mismanagement.
Valued at $22 billion in 2022, the Indian edtech startup’s valuation has since plummeted 95% after investors cut their stakes in multiple rounds. It was most recently slashed to $1 billion, after BlackRock downsized its holdings in Byju’s last month, according to media reports.
The company, which offers services ranging from online tutorials to offline coaching, attracted billions of dollars from investors across the world during the Covid-19 pandemic when online education services were on high demand.
Last Friday, major Byju’s shareholders, including Netherlands-based global investment group Prosus, voted to oust founder Byju Raveendran as chief executive officer.
Investors who attended an extraordinary general meeting “unanimously passed all resolutions put forward for vote,” which also sought to change the board, according to a statement Prosus sent CNBC.
“These included a request for the resolution of the outstanding governance, financial mismanagement and compliance issues at Byju’s; the reconstitution of the Board of Directors, so that it is no longer controlled by the founders of [Think & Learn Private Limited]; and a change in leadership of the company,” said the statement issued last Friday.
However, Byju’s rejected the resolutions, saying the extraordinary general meeting was “invalid and ineffective” due to a low turnout attended only by a “small cohort of select shareholders.”
“The passing of the unenforceable resolutions challenges the rule of law at worst,” the Bengaluru-headquartered firm said in a statement to CNBC.
“Byju’s emphasizes that the Honorable Karnataka High Court had granted interim relief, clearly stating that any decisions made during the meeting would not be given effect until the next hearing,” it said.
“As the founders did not participate in the meeting, the quorum was never legitimately established, rendering the resolutions null and void.”
History of Byju’s
In 2011, Raveendran — a teacher and engineer — founded Think and Learn Private Limited, the parent company of Byju’s. Raveendran was born into a family of teachers in Azhikode, a small village in southern India.
The company claimed that the launch of its flagship product, Byju’s — The Learning App, saw two million downloads within three months of its rollout in 2015. The app offers interactive videos, games and quizzes to help students with everyday classes as well as exam preparation.
The Covid-19 pandemic brought exponential growth to Byju’s when traditional classrooms shuttered, leading to skyrocketing demand for online learning.
In November, Byju’s co-founder Divya Gokulnath told CNBC the company had more than 100 million monthly students on its platform.
Byju’s growth attracted global investors and significant funding rounds including a $1.2 billion in debt financing in November 2021, according to company database service Crunchbase.
Flush with funds, Byju’s went on an acquisition spree between 2017 and 2021.
Some of Byju’s biggest acquisitions include Aakash Educational Services, a leading test-prep company in India, which it reportedly paid about $950 million for in 2021.
Other strategic acquisitions include U.S-based kids’ digital reading platform Epic ($500 million), educational games maker Osmo ($120 million) and online coding school WhiteHat Jr.
“2022 would be the year of maximum acquisitions, nine big ones. So the pandemic was great, because it solved the biggest challenge of people not knowing about how online education can be a part of mainstream learning,” Gokulnath told CNBC in November last year.
“But the disadvantage was also that we had to grow at a frenetic pace. We had to grow to ensure that we were able to meet the demand,” she added.
So what went wrong?
The end of pandemic restrictions saw a slowdown in online learning and Byju’s had to let go of at least 1,000 employees in June last year, according to tech jobs tracker layoffs.fyi.
In the same month, the company’s auditor Deloitte and three of its prominent board members severed ties with Byju’s, as questions loomed around the company’s financial health and governance practices, according to a Reuters report.
Byju’s filed its financials for 2022 in November last year, after a year-long delay due to governance issues and its auditor’s resignation. Operating losses came to 24 billion Indian rupees (about $290 million) for its core online education business.
“One thing that we should have focused on earlier is governance,” Gokulnath told CNBC in the November interview. “That’s something that we’re constantly building on to the next one year. I’m hopeful that we’re also able to stand on the governance side.”
Byju’s has reportedly struggled to repay a $1.2 billion loan and is said to be struggling with staff salaries as well. The firm said in January it is raising a $200 million rights issue of shares to clear “immediate liabilities” and for other operational costs.
The company’s U.S. unit Alpha filed for Chapter 11 bankruptcy proceedings in a Delaware court on Feb. 1.
Byju’s did not respond to CNBC’s request for comment.
On whether Byju’s has lost the confidence of shareholders, Gokulnath said in November: “We would like to believe that we have not, because at all time, we’ve kept the interest of our students, parents, employees and shareholders in mind and what we are doing, we are doing to build this back together.”
Technology
Tesla’s Model Y debuts in India priced at a hefty $70,000 as the EV maker ‘tests the waters’
In this photo illustration, logo of Tesla is displayed on a mobile phone screen in front of the Indian flag in Ankara, Turkiye on November 28, 2023.
Cem Genco | Anadolu | Getty Images
Tesla has made its long-awaited debut in India, where it will sell its electric SUV, the Model Y, starting at $69,770, a significant markup from other major markets, its website showed Tuesday.
The sales launch comes the same day the American electric vehicle maker opened a showroom in Mumbai, its first in the country.
Isabel Fan, Southeast Asia Director at Tesla, also announced that the company would soon launch a showroom in the Indian capital of New Delhi, according to a report from CNBC-TV18.
The report added that Tesla would hire staff locally and set up experience centers, service centers, delivery systems, charging stations and logistics hubs throughout the country.
There has long been speculation about when Tesla would enter India, the third-largest automotive market in the world by sales. However, the high price tag may come as a surprise to many. For example, the Model Y starts from $44,990 in the U.S.
Why are prices so high?
Vaibhav Taneja, Tesla’s Chief Financial Officer, in April, confirmed the company’s interest in India but said it would take a careful approach to the market considering its 70% tariff on EV imports and about 30% luxury tax.
These high taxes explain why Tesla was forced to set its prices so high in India, despite the country’s preference for EVs at much lower price ranges.
Experts told CNBC that this will see Tesla in India compete in the premium segment of the market with the likes of BMW, rather than with local EV companies like Tata Motors.
“I won’t say that these prices are completely out of range because you will find buyers in India for all price points,” Vivek Vaidya, global client leader for mobility at research firm Frost & Sullivan, told CNBC’s “Inside India” on Tuesday.
“The question is whether they are going to threaten the mass market. The answer to that is no because the most popular selling cars probably sell at one-tenth of this price,” he added.
Testing the waters
While the Model Y will struggle to be price competitive, Tesla is likely more focused on “testing the waters” than generating sales in India, Puneet Gupta, Director for the Indian automotive market at S&P Global Mobility, told CNBC.
India first announced a new EV policy last year that promised to reduce duties for companies that commit to building up a local supply chain. While this could help Tesla push its prices down, the company has yet to commit to building any local manufacturing plants in India.
“The Mumbai showroom is a strategic ‘soft power’ move, not a full commitment,” Diwakar Murugan, automotives analyst at Canalys, told CNBC in a statement, adding that Tesla’s hesitation in India is pragmatic, as the market still lacks the demand to justify a large-scale manufacturing facility.
“Shifting a significant portion of its production to India would require a major re-evaluation of its global manufacturing strategy, something it’s not ready to do while its primary focus remains on scaling production in its established markets,” he said.
Murugan predicted that Tesla may only commit to full-scale Indian manufacturing between 2028 and 2030, with incentives like land subsidies and tax holidays, as well as the maturity of the local battery market expected to be important factors.
In the meantime, the Model Y will be a “niche, limited-volume product for wealthy, tech-savvy early adopters who seek a status symbol,” he added.
S&P’s Gupta noted that India’s tariffs on EV exports could also soon change as a result of ongoing trade negotiations between Washington and New Delhi, as well as further tweaks to its EV policy.
Tesla CEO Elon Musk spoke with India’s Prime Minister Narendra Modi on topics including collaboration on technology and innovation in April.
“The Indian government has been very proactive in terms of pushing green, cleaner, electric cars, and I think that Tesla has a clear advantage due to the India-U.S. relationship,” Gupta said.
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