Daybreak - The Byju’s saga so far

Episode Date: January 29, 2024

Byju’s financials for the Financial year 2022, are finally out. Almost 2 years late.And unsurprisingly, it doesn't paint a very pretty picture.The edtech giant posted a consolidated loss of more than 8000 crore rupees on an operating revenue of around 5000 crores. And that’s not all…its valuation has dipped from about 22 billion dollars in the last funding round to less than a billion now.Its quite the fall.Now the cash strapped company is desperately looking to raise $100 million via a rights issue as a lifeline but unfortunately everyone its gone to has outright said no.And it is unlikely that it may work out in the future unless Byju’s submits its audited financials for FY 2023.It missed its own Dec 2023 deadline for filing it. Also, the sword of the 1.2 billion dollar term loan is still hanging over its heard.Let’s catch up with the major developments so far.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission. We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture,

how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd.

To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Byju's results for the financial year 2022 are finally out, almost two years late. And unsurprisingly, it does not paint a very pretty picture. The Ettec giant posted a conclusion. consolidated loss of more than 8,000 crore rupees on an operating revenue of around 5,000

crores. And that is not all. Its valuation has dipped from about $22 billion in the last funding round to less than a billion dollars now. It's quite the fall. And now, the cash-strapped company is desperately looking to raise $100 million via a rights issue as a lifeline, but unfortunately everyone it has gone to has a life-line. outright said no. And it is unlikely that it may come through any time in the near future,

unless Bayju submits its audited financials for FY 20203. Actually, it missed its own December 2023 deadline for filing it. Also, the sword of the $1.2 billion term loan is still hanging over its head. So today, let's catch up with the major developments so far. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickda Sharma, and I don't chase the news cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Monday, the 29th of January.

Black Rock, the global investment management form, which holds less than 1% taken by Jews, has cut down the tech company's valuation to less than a billion dollars. This is after a series of valuation downgrades by Bujou's investors over the last one year or so. In November 2023, tech investor process marked down the value of its stake in Bayju's, which had resulted in a company valuation of less than $3 billion. And now it is even worse. And coming to the financials, Bayju's 22 results had been delayed since September 22 because the company had to deal with the resignation of Deloitte as its auditor.

and also because its board members representing peak 15 partners, process and the Chan Zuckerberg initiative had resigned one after the other. According to the FY 2020 results, the company's operating revenue almost doubled to nearly $700 million while losses went up by 80%. Most of the rise in revenue was thanks to Bayju's offline test prep arm Akash Institute, which saw a 40% jump in revenue, and also because of its online higher education platform called Great Learning. Nearly half of Baidju's losses, meanwhile, were because of White Hat Jr. and Osmo,

which is the US maker of educational games. Bayju's has scaled down White Hat Jr. significantly in FY 2023, though. You must have heard about how the founder, Ravindran, has been borrowing money from investors and pledging his own assets to pay the salaries of its employees. The company also let go of many senior employees and restructured its top leadership. Arjun Mohan, who used to head Upgrad India, has joined the company since September as the India CEO. After that, the ed tech fired at least 4,500 employees in September. So, to sum it up, things don't look good, but not all hope is lost, because Bayju still has

Akash. And the good thing is, Akash now may be free of debt. Last week, it was reported that Ranjan Pai, who is the chairman of Manipal Education and Medical Group, is all set to become the largest shareholder in Akash Institute with a 40% stake. Pi had invested $300 million into Akash last year and the Akash board has now approved the conversion into equity. This values are gosh at around $700 million and also makes it debt-free. But if you're breathing a sigh of relief on behalf of Bayju's, don't do it just yet. Because we still have to talk about the $1.2 billion term loan. The lenders of the term loan have filed an insolvency petition against Bayju's in India. This happened just a few days ago. But before I give you the details, let's go back to the beginning.

It all started back in November 2021 when the EdTech was looking to raise $500 million via an institutional term loan, but it ended up raising $1.2 billion, which was said to be one of the largest unrated term loans by a startup ever. Now, one detail we need to understand about such loans is that they can be traded, which means lending can actually be securitized. The lender can turn the loan it's given to. into an asset. For example, if you lend me 100 rupees, I am an asset worth 100 rupees to you. You can trade this loan with someone else. You can go to someone and say, give me 80 rupees now and you can take

back 100 rupees from Sinaita. And this is exactly what Bayju's original lenders did. They passed on the loan to a third party. Now this third party is the one who is negotiating the terms of the loan with Bayju's and is holding Bayju's accountable for breaching the terms of the loan. And how exactly did Bayju's breach these terms? When Bayju's missed filing its 2021 and 2020 to financials and its own auditor Deloitte flagged its accounts, these investors lost trust in the company. So they asked it to make an immediate prepayment of a part of that loan. Bayju's in turn asked to renegotiate the terms of the loan because interest rates had gone up by quite a bit. But lenders pointed towards Bayju's failures to keep up with the original term of the

loan in the first place. Now, the new lenders want Bayju's to pay a part of the loan in order for them to renegotiate the terms to suit Bayju's. But Bayju's new auditor, BDO, said something about this term loan in the latest financials. It was more like an observation. The auditor said that the loan adds material uncertainty. It also said that the management of the company is in the process of arranging necessary funding through asset sale to clear debt with the lenders. But now, these lenders have come together and filed a bankruptcy petition in the Bangalore branch of the National Company Law Tribunal. Bayju's meanwhile told the media that the lender's move was premature and the allegations were baseless. It also said that it does not reflect on its

financial strength or its ability to meet payment obligations. To find out if that is really true, guess we'll just have to wait and watch. But for now, with soaring losses, the falling valuation, of funding that might not see the light of day, and this bankruptcy proceeding, no one knows what falling from grace means better than by juice. Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, letters, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.