Top 5 reasons for the downfall of Byju’s: From $22 billion to less than $3 billion in just one year

The fall of Byju's was marked by a number of issues including overambitious acquisitions, increasing losses, piling debts, legal disputes, and so on

Troubled edtech major Byju's, which was once an investor's favourite , saw its valuation plummet by a staggering 86% from $22 billion to less than $3 billion in just the span of one year.

Byju's owner Byju Raveendran photo is seen on his company web page in this illustration. (Reuters)

The following are the five main reasons for the downfall of Byju's.

1) Expansion by acquisition spree

Byju's rembarked on an acquisition spree of both domestic as well as international competitors right after the pandemic-induced online learning boom, in a quest to expand their offerings.

Companies it snapped up included WhiteHat Jr. and Great Learning. The WhiteHat Jr acquisition in itself was worth around a billion dollars.

This led to Byju's amassing debts adding up to well over $1.2 billion, far exceeding its ability to generate revenues to repay them.

2) Post-pandemic edtech slowdown

The entire edtech boom slowed down right after the pandemic got over and students returned to classrooms. Since Byju's core offering was online learning, this severely impacted its growth potential and led to increased losses.

For example, its 2021-22 financial statements revealed a loss of ₹5,592 crore, while it was a loss of ₹2,428 crore during the previous year.

3) Piling debts

While previously mentioned that one of the primary contributors to the company's debts was acquisitions, another reason was expensive marketing campaigns which featured high-profile sponsorships and celebrity endorsements. This when combined with the post-pandemic slowdown resulted in mounting debts.

4) Legal disputes

Byju's ended up getting sued by its creditors for defaulting on loan payments, which also triggered insolvency proceedings.

The most prominent legal disputes are between the Board of Control for Cricket in India (BCCI) and US-based loan administrator Glas Trust, both of which have been fighting to get preference of repayment. Other vendors are part of the picture too.

5) Transparency issues and internal struggles

Byju's also delayed its 2021-22 financial reports by nearly a year which eroded investor confidence by a lot. Moreover, its auditor and key executives resigned around the same time as well.

It also had internal issues. Reports emerged of a highly pressured sales culture with unrealistic targets and allegations of aggressive tactics, harassment, and even misrepresentation of products, which increased the employee turnover.

And this also reflected in the treatment of customers, with several parents reporting being pressured to purchase subscriptions beyond their point of affordability.