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Billion-dollar Acquisitions & A Revenue Model Questioned By Its Auditor: Byju’s Rs 4,589 Crore Loss

The Bengaluru headquartered company said, in a press release, that it registered nearly Rs 10,000 crore in gross revenues in financial year 2022 and that between April-July 2022, the company logged a revenue of Rs 4,530 crore.  

Byju's
Representational Image (YouTube/BYJU’S)

New Delhi: A loss of Rs 4,589 crore in financial year 2021, and acquisitions of companies at over $2 billion, is what defines the current scenario in the world’s highest valued education technology company Byju’s. The Bengaluru headquartered company said, in a press release, that it registered nearly Rs 10,000 crore in gross revenues in financial year 2022 and that between April-July 2022, the company logged a revenue of Rs 4,530 crore.  

The company’s revenue in fact, fell 3 per cent year on year to Rs 2,428 crore, down from Rs 2,511 crore the previous year, according to the financial year 2021 results. And the loss of Rs 4,589 crore in FY21, was nearly 20 times the adjusted loss of Rs 231.69 crore loss in FY20 (2019-20). 

The Morning Context puts some perspective into it, a loss in that number would be the company losing Rs 12.5 crore per day in 2020-21. While that was a pandemic year, and other start-ups in the country, like SoftBank backed Oyo (rooms) recorded a loss of Rs 3,943 crore in 2020-21, in this case, the differentiating factor is that one would have envisaged a profit, with education technology being the go-to during the pandemic.

But other edtech companies too are seeing losses. Unacademy’s consolidated loss widened to Rs 1,474 crore in FY21 from a loss of Rs 259 crore in FY20 and Vedantu reported a consolidated net loss of Rs 604.3 crore for FY21, against Rs 150.1 crore in 2019-20 (FY20).  

Like the many edtech businesses, Byju’s also let go of close to 2,500 employees by June this year. In addition, the company has not yet received $250 million from a few investments rounds it announced since September of last year, another report says.  

But defiant to accept things going wrong, Byju’s in its statement from today, claimed the company continues to be a “net hirer with a 50,000+ strong employee base globally. BYJU’S plans to hire a total of 10,000 more teachers in the coming year, adding to its current strength of 20,000 teachers. To fuel its growth, the company is expanding its teams along with hiring senior leadership to effectively further build operational strength.” 

Its statement said it received “an unqualified report for FY21 from its auditor, Deloitte Haskins & Sells. The revenue for FY 21 of the BYJU’S group is Rs. 2,428 crore.”

During the FY21 period, Byju’s had also come under the scanner of the Directorate General of Goods and Services Tax Intelligence over alleged evasion. The matter was settled after the company agreed to pay what it was liable for. 

“The Directorate General of GST Intelligence finalised the investigation on February 18, 2021, against books supplied during the period July 2017 to October 2020,” according to the audited earnings report. “This has resulted in payment of GST of Rs 96.17 crore, interest of Rs 27.95 crore and penalty of Rs. 14.43 crore. The authority has concluded the investigation without issuing show-cause notice since the GST liability was accepted and paid by (Byju’s) parent.” 

Where Did The Money Go? 

During the financial year 2020-21 Byju’s money, according to their auditor Deloitte, and published by The Morning Context, it made Rs 320 crore from course fee, Rs 108 crore from streaming services and Rs 1,848 crore from Sale of SD cards.  

What has also affected the company’s revenue is its constant acquisitions over the last year. Tracxn says BYJU’S has in total made 20 acquisitions and 2 investments. The company spent over $ 2.88 Billion for the acquisitions, investing in multiple sectors such as K-12 EdTech, Continued Learning, Mom & Baby Care and more. 

Reports speak of how Byju’s also delayed payments to Aakash Educational Services’ shareholders – Byju’s said in July that it had cleared payments to them – including to private equity company Blackstone, by two months. Byju’s acquired Aakash Educational Services, in April 2021 for about $950 million. The private equity company however, which owns 38 percent stake in Aakash educational services, reports say haven’t been paid yet. It owes Blackstone almost Rs 2,000 crore with the deadline looming for September 23.  

But Aakash Educational Services’ is not all, since 2021 the ed-tech company also acquired Great Learning for $600 million in a cash, stock and earnout deal. Reports also say that Byju’s committed $400 million of additional investment into the company; another company acquired was California-headquartered Tynker for $200 million, amongst others.  

The audit report though, comes 18 months late. It was apparently due to Deloitte’s apparent delay in signing off on its results. Deloitte had flagged certain concerns with the way Byju’s was calculating its revenue, delaying its results to the Ministry of Corporate Affairs. The ed-tech company had set at least four deadlines for submitting its results to the MCA, but had missed all of them. 

The MCA also requested a response from Byju’s in the last week of August as a result of the delay. Because of this delay, Member of Parliament (MP) Karti Chidambaram had even written to the Serious Fraud Investigation Office (SFIO), a statutory corporate fraud investigating agency, asking them to probe the finances of the company.  

Counting Unhatched Eggs 

Deloitte’s concerns were as to what Byju’s was recognising as its revenue. When someone would sign up for a longer-term course, the entirety was being accounted as the revenue for that fiscal year. The problem being, that many a times the sales would not go through. This model was therefore changed, with the revenue deferred over the period of the course. This reportedly led to products and services worth Rs 1,156.27 crore not being recognised as revenue – which would be done after the amount is received by the company. 

Why it’s important to do this, is when one looks into the question of raising funds. Byjus would show a number of bookings which may or may not succeed in fruition – but these booking numbers taken into context, would mean inflated numbers.  

Morning context even spoke with salespersons who allegedly admitted to putting fake sales. “Salespeople sometimes put in more than Rs 15,000 as down payment from their own pocket to punch in a sale of, say, Rs 2.5 lakh.” 

Last October, the company raised $300 million as part of its plans for expansion. In March this year, Byju Raveendran, the co-founder and chief executive of Byju’s, invested $400 million into the start-up. The report then highlighted how Raveendran’s backing was part of a larger $800 million round that Byju’s had secured.  

It said that Sumeru Ventures, Vitruvian Partners and BlackRock also invested in the round. The round values Byju’s at about $22 billion. 

Its plan to venture into public foray too was deferred. Planning to do a public share listing in the US, its plans for Initial Public Offering (IPO), it said, would have to be pushed by 9-12 months over macroeconomic factors. 

Reports also spoke of how the Abu Dhabi’s Sovereign Wealth Funds (SWF) and Qatar Investment Authority (QIA) were in talks with Byju’s to raise in the range of $400-500 million and $250-350 million at a valuation of $22 billion.  

A report from early September by the Economic Times, said QIA, which had been in advanced talks for the investment, was yet to take a final call. “It was planning to invest at a 40-50% discount to the $22 billion the company had commanded in its last round,” the report said.  

ADQ of Abu Dhabi has been an investor in the company since last year. ET had reported it was among investors in a $350 million fundraise by the company, which had pegged valuation at $16.5 billion, making it the most valued edtech company in the world. 

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