Daybreak - What happens when you sell education like shampoo? Byju's knows

Episode Date: September 12, 2024

Back in the late 2000s when Byju's was founded, it was best known for teaching students how to 'hack' competitive examinations like the CAT. They taught students how to work backwards from the answer and use a bunch of shortcuts to get the highest score possible. The art of 'hacking' examinations was something that the company's founder, Byju Raveendran, was the master of. Or at least that's how the Byju's origin story goes. It all started back in the early 2000s when Byju, an engineer from a small town in Kerala, began helping his friends with the CAT exam. Every time he would sit for the exam, he’d score in the 100th percentile. This was when he sharpened his ability to teach-the-test. The lore spread and Byju's was created. By 2022, its valuation hit $22 billion. The company was on a dream run.The real trouble began when Byju’s began applying this hack method to its growth with unrealistic sales targets and billions of dollars in loans. Fast forward to now, on Sept 17 2024, the Supreme Court of India is going to hear a plea against the NCLAT's stay on insolvency proceedings against Byju’s. In this episode, we dive into the Byjus saga. How did it get here? And who is to blame? Hosts Snigdha and Rahel speak to Olina Banerji, who covers education for The Ken. Subscribe to her newsletter, Ed Set Go. If you've been wondering what The Ken is all about and why our subscribers love us, here is your chance to find out. Check out our special 30-day trial curated just for you

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 Raman Ganeshan, 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,

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here is your chance to find out. All you have to do is sign up with your email and start reading. Just log on to the-kin.com slash trial. And now on to the episode. In January this year, Baidu Ravindran wrote a letter to his shareholders about why he was considering going for a rights issue. In this letter, he quoted a few lines from Invictus, which is a poem by William Ernest Henley. Rael, would you read out these lines for us, please? Okay, let me give this a shot.

Bear with me. In the fell clutch of circumstance, I have not winced nor cried aloud. Under the bludgeonings of chance, my head is bloody but unbowed. Okay, it kind of sounds like the line some warrior hero would say in a Greek tragedy movie, right? Yes, but that is the thing about Bayju Ravindran. He's always had this larger-than-life personality. And he has made great effort to maintain it too. In another letter to his employees, when,

salaries were delayed earlier this year, he wrote about how he was moving mountains for months to make sure that they were being paid. And it all started back in the early 2000s, when Baijus, who was from a small town in Kerala, began helping his friends with the cat examination. And every time he would sit for the exam himself, he would score in the 100th percentile. And this was when he sharpened his ability to teach to the test. At least that is how the story. or should we say, the lore of Baidu's course. He became, of course, super popular. By the time he founded Baidjus, his method of hacking examinations became the company's USB.

The hack method is something that Baidju's applied not just to competitive examinations, but also to its kindergarten to 12th school material as well. The real trouble began when Baidu started applying this hack method to its growth as well, with unrealistic sales targets and billions of dollars in loans. But on the outside, of course, things were looking fantastic. Its valuation reached an insane $22 billion in 2022. It looked like the company was on a dream run. Fast forward to now.

On September 17th, which is coming Tuesday, the Supreme Court of India is going to hear a plea against the stay-on-insolvency proceedings against by Jews. To be honest, there are so many court cases and so many different, developments in the Baiju story that it is hard even for us to keep up. When you try to look at it all at once, it kind of appears like this huge tangled up mess. So in this episode, we are diving into the Bayju saga. How did it get here? And who is to blame? Hello and welcome to another special episode of Daybreak. I'm Snigda. And I'm Rahil. And every week, we come together to talk about something in business and tech that interests the both of us. And it won't just be us.

Depending on what we are talking about, we will bring some really interesting people onto the podcast. In this episode, we are joined by Olina Banerjee. She covers the ed tech sector for the ken and also writes one of our popular newsletters called Ed Setpo. You must sign up for it in case you haven't already. Stay tuned. You know, I'm very curious to know you've been covering ed tech for a while now. And as a reporter, what's your first really distinct memory of Bayju's? back when it had entered the scene?

That's a really interesting question. I have a couple of things that I can go back to, right? One was, I don't think I'd ever met an education business founder quite like Bajudavindran. So when you go into his office, right, it was a sweeping view of a part of, you know, Bangalore. You met him? Yes. Wait a second.

Yes. You met him. A couple of times. This was back in 2019. when it was all, you know, sort of kicking off. And Arun Dati, a colleague of ours and I went down to their offices in Bangalore. And it was a giant office. It looked like a call center with a ping pong table, you know, right at the entrance near the elevators.

And he gave us a lot of his time. He was generous with his time. He explained the business to us. And the first thing that struck me about him was just how much he kind of emulated the likes of Steve Jobs. he was dressed in a black t-shirt that's become his signature style. And this was the first sort of few years of byju's popularity and the lore was just getting built. So it was interesting.

It was interesting to see someone who wanted to build the world's largest education business out of India. And he believed that we had the manpower, we had the brains to do it. So the vision was quite impressive. It was quite bold. And I think the other kind of distinct thing that I remember, about my first story that I did on by Jews was how I think we did we we reached out to a group of experts on trying to figure out whether the content was good right whether the pedagogy was good

and they told me it's great for when you want to pass an exam but is it really teaching kids and that kind of that distinction kind of stuck with me and that's when I started to realize what at tech was trying to do it wasn't a revolution in what you teach it was a revolution and how you teach. So I think that first story was very formative in my understanding of what Indian net tech is. Okay, just to set up context for our listeners, right now we're talking about the early years of Bayju's, right? And the lore around that company had already grown so quickly and so exponentially. And a lot of that law was actually tied to Bayju Ravindran himself.

He became that guy. You know, if you wanted to crack the examination, he was your go-to guy. because of course legend has it he managed to crack the cat a bunch of times never really did his MBA allegedly we of course

don't have the receipts for any of that but he was able to sell a compelling enough story that everyone wanted to buy right buy juice very quickly became the place to go if you wanted to learn how to hack an exam emphasis of course on the word hack

but what was it about byju's in particular right olina why do you think people were so ready to buy into that byju's lore. Right. I think people don't realize or maybe, you know, we've just started to realize just how much is connected to those first few years. And, you know, as we reported a while back in AetSET go, one of the early sort of co-founders or part of the early members of the management team, Arjun Mohan, who later on went out to become the up, the CEO of Upgrad. He kind of, he kind of

talked about this early years in a way, I think, that we really hadn't heard of before, which was surprising that he gave this interview to sort of a small YouTube channel. And I think it's interesting because it's connected to who Bajiravindran was. He was this guy who could help you crack the cat exam, which is notoriously difficult to crack. And he did it at scale. And he did it in a way that was just, I suppose, so impressive and so impactful. I suppose people did crack the cat after, you know, his coaching. And that's the whole kind of mentality that he brought to his business.

So on the one hand, because he was the visionary, because he could crack the code of exams and of scaling, everybody kind of listened to him. So his initial sort of a group of seven to eight co-founders were his students, right, were people who had studied under him. So they obviously were kind of devoted to him as a teacher, but also then as a founder. And then you can start to understand how top-down Bayju's became, right? How sort of everything, all ideas, all directions float from the top. And everything was very tightly managed by these seven to eight people who, you know, went on to become kind of the core management of byju's in later years. And the second thing you've got to remember about, if we go back to sort of the initial lore,

is how it was used to sell the product. So when salespeople were going into houses to talk to parents about selling by juice packets for their kids, they were essentially harking back to those initial years where they said, look at the founder of the company, he's so visionary, but he's also such a great teacher, and he's going to teach you the fundamentals, he's going to teach you how to, like, crack exams. But I think it's interesting to also, like, there is a significant difference in what salespeople were telling parents. They were telling parents not just that

kids would be able to crack exams, but also that they would fall in love with learning. They would do this in a sort of grandiose conceptual way that wasn't done before. Of course, we don't know whether it really was conceptual learning, whether you know, maths concepts were getting better. But that's how it was sold.

But it very much went back to sort of the initial power of what Bayju Raindran was able to do with the cat exam. Bayju's wasn't the first education company to teach students how to hack a competitive exam. India's tuition republic has become a 58,000 crore-rupy industry which is doing just that. But what set Bayju's apart initially was how it was using digital means to scale up. Nobody had done that before.

Hello, my champions. Welcome to your favorite channel, Biju's grade 6, 7 and 8. Now, in this diagram, two regions are shaded. Let me number it as one and two. You have to find region one plus region two. I'll also give you answer options. It's a paradoxical sentence. Contradicts, it's logical contradiction.

I know. I know, I know that I'm what I'm nothing. So then he even how can't know? Right? So, that's why this quote is called the Socratic paradox. The Bayju's approach to exam prep involved 3D visuals, slick editing, and of course a very resilient team of teachers who fully believed in Baiju Ravindran's vision. In fact, in an interview, Bayju's most recent India CEO, a man named Adrian Mohan,

said that the early team would tirelessly record day in and day out. He said they managed to record 110 hours of content in two weeks at one point. But as the company got bigger, it became harder and harder. harder to identify its core purpose. You know, it's quite interesting to see how the company kind of built its core products around this very legend or lore, right, about byjuice. Because back when it started, they had a team of teachers who were focusing exclusively on how to crack these exams.

And basically what they were doing was, you know, they were teaching you how to work backwards from the answer and they would teach you a bunch of shortcuts to get the highest score possible. How to hack exams, which is what we've been talking about. And of course, that became what by Jews was best known for. But, you know, as a year's went by Olina, the company got bigger, what ultimately was its core product? It's almost too difficult to explain now after sort of 11 years of this, 11, 12 years of this company being in existence. But I think if we go back to the beginning, it was a simple idea. It was to say that look at all the best content.

of how we teach math or science or social science. And let's put all of that onto a digital framework. So I think it didn't really start like that. I think Bayju's very much was of the mold of physical classrooms and effective tutor up front, taking you through exam prep. But his genius, I think, was to realize that this wouldn't scale, it wouldn't scale to the extent that he wanted to. So he sort of took the whole digital revolution on its head, put things onto flash drives, onto CDs, started selling those. And then I think there was a critical moment. There was a pivot when the first investors entered the fray. And that was Ranjana Pai and Aran Capital entered the free. And I think that's when this kind of coaching business startup turned into like this

tech startup, right? And that's when I think he realized that putting things onto the digital framework would help it reach many more people. And then once they did that, they created an app. And so in its very rudimentary version, it was a whole bunch of sort of explainer videos with a lot of animations, right? With sort of very well-qualified teachers doing those explanations. And it grew from that, it grew into, it grew from cat coaching into other kind of test prep into sort of then the K-12 business. I think that's when Bajudavindran realized that, hey, I can tap every kid from kindergarten right up until grade 12th, you know, with my philosophy. And I think that's, that's, that got the ball rolling and then they branched off into other apps.

Then the K3 business launched. They partnered with the likes of Disney, you know, so it's, it's, it's, kind of just grew from there. And the main product basically exploded into sort of an everything kind of product. So if you were thinking about education at every juncture of life, you could come to by juice. I think that's what the product became. Right. But Olina, what gave parents this sort of confidence, you know, that this was the right choice for their kids? Because there were already so many coaching centers in the picture. How did it? How did buyju's come into the picture and convince all of these parents that their product was the one that was worth paying for so i think well with with indian parents right what are you ultimately looking for

you're trying to look for whether your kid is going to score on an exam at the end of the year right i think that's what that's that's that's the top concern and that's what byju's was trying to sell when it went into homes um that's what it that's what it sales people were telling parents that if your kid doesn't go through our by-use course, they're going to be left behind. Now, whether they explicitly said, hey, they're going to crack this exam and get 100%. I don't think they were saying that. And we have recordings to prove that that's not what they were saying. But I think the subtext of what they were saying was, if you don't use by-use,

your kids are going to get left behind and are not going to be top scorers. They're not going to be able to get into the right IITs and IIMs. And so they were kind of charting this path to success through the course for parents. And I think what that meant was also that if you took up a by-use course in, say, grade six, they would come and tell you that's not enough. You've got it to stick with by-dues right up until grade 12. So parents would end up buying packages for multiple years and renew that subscription for multiple years. So you're going in for maybe a $25,000-rupe course and suddenly you're kind of paying $1.5,000 for like a package course. So that's what by-juice was selling,

was setting this dream of being able to not just crack the exam, but do it across multiple years. Do it until sort of, you know, you succeed at getting into a great college. And so I think with Indian parents, the psyche very much is, and it's not a new psyche. I think they were exploiting an old psyche where all of us have been to tuition classes after school, right? And why did we do that? Because our parents wanted us to get a better chance at cracking the exam, a better chance at getting into a good college. I think it's very much the same psyche where the middle class Indian parent will pay up to 23% of their annual income on a child's education.

And I think Bayju's saw that. They saw that there is a spot of money that parents are willing to spend. Why don't we sort of, you know, disrupted with our cool new tech. And so that's why I go back to saying, I don't think they changed what was being taught. I think they changed how it was being taught. And I think, yeah. And I think that's the rest of the. Revolution was the business model they built around it.

It made life difficult for all the other ed techs around it because investors coming into Bayju's were seeing the kind of growth that, you know, Bayju's was saying or it was saying it was doing. And it put pressure on all other kind of ed techs because they said, hey, if we don't show that kind of growth, then we aren't going to get the kind of funding that Bayjuze gets. And so it put pressure on everyone else to sort of be like Bayjuice. So you had the likes of an academy or Bedan Tu Kui come. you know, slightly after Bayju's.

And you kind of saw a shift in their culture too because there was so much pressure for them to sell and compete with Bayju's. And it also spawned the sort of other set of at-tech startups that were getting created just to be acquired by Byjus in the future because they saw that Bayju's is going to be this giant fish. And they wanted to sort of come up to a point where they would, they could kind of slot nicely into the whole Baidu's empire. So I think it put pressure on other ed techs,

but it also put pressure on investors because everybody was clawing over each other's back to kind of invest in this next big thing. And that raised the stakes. It exponentially raised Bayju's valuation over what its revenue was. So it, I think, changed the shape of competition in the tech space.

Right. Baidu's kind of became like this bench. for the rest of the ed tech space, right? It became like the flag bearer of ed tech in India in many ways, right? Right. And there's one more thing I'd like to add here. When the whole sort of the start of the downfall happened, you know, about two or three years ago, I spoke to a lot of investors about what that meant for the tech sector.

And they said it's not just the tech sector. You have to realize what this means for the entire tech startup industry in India and abroad. because this is a company that grew so quickly to $22 billion, to a valuation of $22 billion, and everybody took cue from that. And everybody thought, hey, it's possible to grow that big. And it started, and it created this whole virtuous cycle of investors thinking that if we pump money into this space, we're going to get big too.

And so the crash would have impacted not just other techs, but tech startups in general. Yeah. Right. I remember when PGK's newsletter, he called it. the world's most innovative financial engineering company. That's a great way to put it, yeah. We all know that the pandemic was the best thing that could happen to India's tech sector.

The biggest winner, of course, was Bayju's. And like Olina mentioned at one point, the company was valued at $22 billion. Bayju's became the world's most valuable ed tech. The company that taught kids how to hack competitive exams had managed to hack its growth to. It won the UiC lottery and everybody wanted a piece of Baidu's. It seemed like a dream run until it wasn't. And we all know that this story does not have a happy ending. Stay tuned for more on that.

Bayjuze wrote the Ed Tech Playbook and at the very core of its business model was a relentless pursuit of growth, especially during the pandemic. Baidu's went all out with endorsements, discount codes, all to acquire more and more users. And it worked. Of course, it helped that the company had a ready-made, captive audience all thanks to COVID, but the company did everything it could to milk that audience. It did things that no other ed tech company had done before.

But some of its big, bold business decisions ended up backfiring. We spoke to Orlina about how the eventual unraveling of Baidju's actually played out. Okay, Alina, you know, credit where credit's due. byju's really kind of democratized digital learning in so many ways for students from across the country. You know, a lot of groundbreaking stuff that was happening in this space. A lot of innovation was actually because of Bayju's. But at the same time, you know, the company was becoming more and more obsessed with growth. And with getting bigger, acquiring more users, it was stopping at nothing to be able to do that.

You know, I mean, Bayju's wasn't just offering discount codes. the company was literally giving parents loans to sign their children up for their courses. So can you kind of tell us a little bit about what is going on at that time? Sure. I think it's if you look at Bayju's as a visual, if look at the company as a visual, and if it's an iceberg, the part right on top was what all the fancy, shiny things that we saw, ads on TV, you know, Baijudavimran headlining a lot of conferences and talking about falling in love with learning. So it was, it really looked like this was a revolution in education. Every kid could access quality education at the tap of a button and that's what they were trying

to project. And in many cases, that was right too, right? You never had such a sort of composite app before where you could access everything from, you know, K3 education right up till grade 12 and beyond. But I think we have to focus on what was happening below the surface. And that's where, you know, all the, I suppose, like, the messiness that later was revealed, that that's where it was happening. And a couple of things that are interesting about this is you, if you look at Baijou Rabindran's own history, right, he transitioned very quickly from being this ace teacher to being an ace entrepreneur to then becoming this kind of business magnet who wanted to grow his empire very quickly. If you sort of look, if you spoke to him at a conference,

I've heard this from other entrepreneurs who spoke to him. His advice to younger entrepreneurs would always be just grow. Just grow as fast as you can and figure everything else out later, right? Which is a weird thing to hear from somebody who's a teacher, somebody who like cares about education. I'm not making a judgment here. It just didn't sit, like all his personalities kind of maybe clashed a little bit together within the same person.

But all that to say is that by you really believed in the growth mantra. believe that Bayju should be the largest education company in the world. So the things that he did to grow were, A, he, I think, almost pioneered this kind of loan product in the education loan business, right? And so if you look at the number of kids that Bayju's could sell to, potentially it was 260 million school-going kids. But only about 5 to 10 million of them could you really monetize on. So you really had to capture that market very quickly. And you have to had to keep that market alive. You had to keep getting them to sign up for subscriptions. So that was that was sort of like the market that you could earn money from, at least in India.

But as we know, not everybody can afford to pay one or two lakhs for a course, right, every year. So that's when I think Baidu representatives would go in and say, fantastic, you can sign up with us and you also get, you know, free financing. And what did that free financing look like? loans created through Bajaj FinServe and other loan-giving businesses. And it was the first of its kind because I think it would just, these loans would just slip into sort of, you know, the package that they would sign to, the parents would sign to. And they would just say, hey, look at all this money. It's just like an EMI, you know, you're just going to, there's just going to be some money

deducted from your bank account every month. it's just like buying a TV on EMI, right? That's interestingly, another thing that by used it was to start to sell education like a consumer product, which I don't think had been done at scale before. So all of that led to later on parents realizing that, hey, we're actually paying a loan. We're paying interest on this loan. And, you know, we don't want to do that anymore. And of course, that kind of led to all sorts of complications in trying to, in trying to cancel their subscriptions and them not being able to do that. So a lot of people were put out of a lot of money because by-jus just wasn't transparent about how it was trying to grow. And it grew because

it could it could very easily sort of slip in these loans that look like EMIs and parents would sign on without realizing that. So that's that's and that's tied into the kind of toxic sales culture that we mentioned before because there were such high targets within the company, sales representatives felt they competed with each other to get as many signups as possible. And they would do anything from, you know, barging into people's homes, convincing them, you know, doing these kind of hour long demos to even later on when things became sort of tight, they would even create sort of fake signups. So it all goes back to the idea that you have to set. at all costs. You have to grow at all costs. There is no looking back, right? There is no

there's no other way to do it. And I think that's, that's, I think, what culminated into all the problems that we saw later with the company. O'ina, you said something really interesting just now. You mentioned how this was the first time that education was being sold almost like a consumer product, right? We saw all those TV commercials where you had people like Sharok, Messi, endorsing Bayju's. What was our tribe in monies and daddies. So let our children fall in love

with learning. Download Bayju's the learning app. What was Bayju's really thinking? I mean, think about any kind of mainstream product that you buy it, whether it's a biscuit or a shampoo or even like a toilet cleaner, you have Akshay Kumar coming onto your screens at 8 p.

in the evening, you know, trying to sell you this toilet, you know. So it's really, I think Bayju's understood that why should education be any different, right? Why shouldn't there be brand recall when you're thinking about an education brand? Why shouldn't people get excited when they see a Bollywood star selling their favorite, you know, exam prep course? So these are two things that he brought together. And I think it, it, in his head, there are interviews where his managers, you know, Arjun Mohan's interview as well, if you go back to it, he does say that all of us were kind of perplexed on why you should drop so much money on a TV ad with Sharup Khan, right? We're an education product. Like, it's not shampoo. But I think

his genius at that point was to say, no, this, we are going to sell education like shampoo. We are going to put Sharuk Khan on prime time television. And there's also, he's strategic, if not anything else. So he knew that when families gather over the dinner table, you know, it's the one time. This is the 2015, sort of 2015-2016, so phones weren't that ubiquitous. Not every teenager had a phone. So he knew that when the family is gathering for dinner, when they're watching TV, the kids going to have the phone. So if Sharkhan's going to come on screen and talk about by juice, it's going to be brand recall for the parents, but the kids also going to probably download the app, probably sign up for a free trial. And then, you know, that's how they were

would rope in both the parent and the child. So in retrospect, we can say that it was a great strategy. It didn't pay off. You know, we're still seeing the fallout from that. But I think that's the whole idea. So when he went into sort of international markets, when he went into Brazil, that's when, you know, he decided, hey, we're going to sponsor the FIFA. We're going to get messy as a brand ambassador.

They spent 30 to 40 million bucks on, you know, getting FIFA involved. So it was very much to say that we are going to be a mainstream education brand. And just as like an interesting tip, but this was never verified by anybody. But the conference I went to in the U.S., when Byju's was kind of acquiring its U.S.-based companies, there was a big sort of murmur around the room on who's going to be the U.S. ambassador and apparently it was going to be Will Smith. But we could never confirm those reports. But that's sort of like, that was his mentality.

that was he was one of the few people who wasn't ashamed about putting education in the same aisle as your consumer food products. Again, like two very differing views of Baiju that, you know, generally go around. There'll be some people who call him a visionary and there'll be some people who call him like an absolute like megalomaniac, right, to the point where only what he said would go, right, within Baidu's. Baidu's became somewhat of a fortress. how much of a role do you think that had to play with, you know,

the eventual kind of collapse of Bayju's? I think Fort is a great way to put it, because in the initial years when we were reporting on Bayju's, and the Ken, I think, to its credit, was one of the few organizations that really sort of tried to figure what was happening under the surface. We would get very little. You know, we would understand very little about what the organizational structure was.

almost every, every, every, every call would be fronted by Jiu himself. And you could figure out that he held a lot of power, but I didn't really understand it only a few months ago just how much power, right? And remember I talked about the initial seven to eight people who were completely devoted to him. One of them became his wife, Deviago Kulna. The other person became his chief marketing officer. Renal Mohit became then chief operating officer.

later on, the likes of Arjun Mohan. So it was a tightly held group. But even within that group, you can understand that Bayju's held all the decision-making power. So the decision to go out and acquire other companies, the decision to expand to the U.S. or the UK or to South American markets, I think that was all, those decisions were all tightly controlled by Jus because I think he believed in his own, he believed his own lore. I think he believed in his own power to expand. And he believed that he could do it. And he was, I think, a big proponent of fake it till you make it. And I think he truly believed that he had made it. Right. There was no, there'd be no scrutiny. There'd be no questioning beyond the point. And for a while, it did, it did seem like that.

You know, when they hit that valuation of 22 billion, people, people were like, this is it. this is the pinnacle of the education industry. So I do think in retrospect, he would have benefited from listening to some advisors or listening to his investors or maybe even if there was some sort of struggle within his management team, if there was feedback from his management team, he potentially maybe ignored it. But I also want to be clear that nobody was really asking questions before 2022, right? I don't believe anybody internally was asking questions. I don't believe as investors were asking questions.

So if you haven't seen someone's audited financials for two years, as an investor, what the hell are you doing? Right. So it's, I think there's a, it's, it's, it's, in retrospect, it's easy to say, oh, he was the cause of everything, but you have to understand that the environment around him was also some. The whole ecosystem was sort of just extremely supportive and not at all, uh, critical about anything. So, you know, raising questions really wasn't part of his culture. So how much can you expect him to answer? Ravindran drove the company into multiple acquisitions. He had his eyes

set on growth and growth alone. He acquired heavy weights like Akash and Great Learning. The company went global. But there just weren't enough leaders to run operations across 21 countries. And like Orlina said, no one told Ravindran to step back until it was too late. The bubble finally bobbed. The pandemic ended and the demand for online education started to subside. In a little over a year, the company's valuation dropped from $22 billion to under $2 billion. The lawsuit started coming in and the creditor came knocking on by Jew's door demanding that it repay over a billion dollars that it owed them. And the company's biggest shareholders all demanded that Ravindran should be removed as the CEO.

The final nail in the coffin came in July this year. The National Company Law Tribunal ordered insolvency proceedings against the company over unpaid debts to the Board of Control for Cricket in India. We asked Olina about the cases against Bayju's and what's next for the company. Olina, you know, when you look back, do you think there was like one particular point, like a tipping point where the unraveling of Baidu's actually began? And, you know, of course, I know it was a combination of multiple things, but if there was one point that you can think of maybe like a catalyst of sort, you know. So let me answer this question in two phases, right? The first phase was, I think, what I'd like to call the phase of bubbling discontent when we were reporting on how, we were reporting on the misselling of loans, parents trying to cancel their subscriptions by just trying to tightly control their online identity.

and at that point it was all defensible, right? Byjus would come back and say, oh, it's just a few bad apples in our sales teams. This is not our culture and this is not how we do things. But there were growing sort of instances and examples of such things of misselling. And I think one thing that happened during that phase is also, they acquired a company called White Hat Jr., who had this sort of extremely incredulous marketing campaign

where they talked about an imaginary child called Wolf Kukta, who got a, as a kid, got a Google level salary. So, you know, all of this was sounding really incredulous and people were just like, ha ha, this is, you know, by users a joke. You could tell that something is going wrong. Something is off. But again, there was not a lot of transparency in their operations. The real tipping point where I think people outside of ed tech or education started to pay

attention was when Deloitte resigned as their auditor in 2023. the Ken broke that news. And that's when I think the world realized how wrong things were within Bajus. Their own investors had no idea about their financials. Deloitte couldn't get to a point where they could convince themselves to sign off on their financials. So you knew that something really terribly had gone wrong. And I believe that's sort of the tipping point for the rest of the world.

But for a lot of us who covered, who had covered Bayju's in the initial years, we knew this was coming. something big was going to blow up. And now we've reached a point where the other auditor has also resigned to three days ago BDO has resigned, right? That's right. Again, is there any precedent for this, O'Lean, like something like this? Has it ever happened in any other company?

I can't speak for outside of ed tech, but I believe in ed tech, I don't think any other company grew this large or had such a string of, you know, financial mishaps and a string of auditors quitting in such quick succession. At least I can't think of any in the recent past. Right. Just one more question, O'Lean. Since you're in the US, what happened to the lawsuit against Bayju's over there?

Because it's a bit unclear to us here as to where things stand right now for byju's in the US. So I think at some point after they started to acquire their US-based subsidiaries, which involved, you know, really sort of well-known companies here, like Epic, which is a repository of online books, that a lot of schools use, right? So they weren't making small fry acquisitions. They were kind of getting into the business with big names. At some point during that time, they took out a term loan from U.S.-based investors for about $1.2 billion. And at that time, it seemed like Bajus would

be able to pay back this loan. It was using it for sort of growth in the U.S. But soon after Deloitte resigned as an investor, we started to hear, sorry, Deloitte resigned as an auditor. We started to hear reports of these investors starting to ask for their money back. So the lenders weren't all of a sudden confident that ByJus would be able to pay back their money. And they wanted ByJus to settle accounts pretty quickly, which led to sort of them dragging By Jus to insolvency court in the US. And Baidu's Alpha, which is a subsidiary of By Jus registered in Delaware, essentially came under the control of these group of investors. So Bayju's was already fighting, of an insolvency battle here in the US.

A part of that, quick aside that is, apparently $5333 million also went missing from Bayju's Alpha, which was apparently parked in an offshore account through the ages of a really shady, unknown investor. So whose headquarters were apparently registered at an I-Hop. So there's all of that sort of confusion and absolute sort of incredulity going on.

on in the US. And soon on the heels of that, we hear that, you know, BCCI has come back for its receipts. BCCI is like, hey, where is our money? You promised to sponsor the Indian team and you did. And you benefited so much from that partnership, we want to be paid. And Bidu's, of course, had not paid BCCI in full. And BCCI has now dragged them to insolvency court in India. And the last thing that we know about that is they have made some sort of a deal where BCCI is going to get paid off first. when Baiju gets money to pay back its debtors. But the glass trust, which is the group of investors in the U.S., have been kicked off that creditor panel.

So there's definitely, again, kind of more intrigue around what's going on, who gets paid first. But in all of this, I mean, the one thing that's really clear is that Bayju's kind of lost trust with its financial advisors, with its former investors, with just basically, you know, anybody who could potentially lend it money. So we're not really sure how they're going to come out of this crisis as by who's going to be sold for parts,

or does the eponymous founder have another trick up his sleeve? 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 store. newsletters and podcast extras. Head to the Ken.com and click on the red subscribe button

on the top of the Ken website. Today's episode was hosted and produced by Rahal Philipos and I, Sinkda Sharma and it was edited by Rajiv Sien. Also a huge shout-out to Aditi and Kavipriya and the rest of our fantastic design team here at the Ken for the amazing artwork

that they make for every Friday special episode of Daybreak.