Leading edtech company BYJU’S is currently traversing a tumultuous period of difficulties, with anything from a large valuation decline to around 1,000 employees’ salaries being delayed. This article explores the latest events, providing insight into the causes of the salary delay, the company’s financial difficulties, and the possible effects on BYJU’S and its stakeholders.
Credits: Inc42
Salary Delay Due to Technical Glitch
In a surprising turn of events, BYJU’S spokesperson revealed a delay in the disbursement of November salaries for approximately 1,000 staff members. The company attributed this delay to an “unexpected technical glitch,” assuring affected employees that payments would be processed by Monday, December 4th.
The salary cycle, which typically resets on the first day of each month, has faced disruptions for BYJU’S employees under Think & Learn, the parent company. However, the issue does not extend to its test prep subsidiary Aakash Institute. The company stated that the delay impacts a limited percentage of employees, specifically less than 5%.
Financial Woes and Valuation Decline
BYJU’S is dealing with more than simply a problem with delayed salaries. The valuation significantly dropped as a result of Dutch investor Prosus writing down the value of its holding in BYJU’S. The edtech company’s valuation has dropped by 85% to under $3 billion from its previous $22 billion estimate during its most recent fundraising.
Ervin Tu, the interim CEO of Prosus, acknowledged the various difficulties BYJU’S has been facing on a call for earnings. Prosus has been actively involved in helping the startup overcome these obstacles and get back on track, together with other investors.
Broader Challenges: Legal Disputes and Regulatory Scrutiny
Apart from the salary delay and valuation decline, BYJU’S is entangled in legal disputes and regulatory scrutiny. The Board of Control for Cricket in India (BCCI) has brought BYJU’S to the National Company Law Tribunal (NCLT) over a sponsorship rights dispute concerning the Indian cricket team’s jerseys. This adds a layer of complexity to BYJU’S current challenges, bringing legal battles into an already troubled landscape.
Additionally, the Enforcement Directorate (ED) has issued show cause notices to BYJU’S and its founder, Byju Raveendran, regarding alleged Foreign Exchange Management Act (FEMA) violations amounting to over INR 9,000 crore. The regulatory scrutiny further intensifies the pressure on BYJU’S to address and resolve these legal issues promptly.
Financial Snapshot and Strategic Moves
Amid these challenges, BYJU’S released some financial numbers for its core operations. Think and Learn Private Ltd, the parent company, reported an EBITDA loss of INR 2,253 crore in FY22, compared to INR 2,406 crore in FY21. The financial statements indicate a struggle to maintain profitability, which may be exacerbated by the recent hurdles faced by the company.
BYJU’S is actively working on securing new financing to address the delay in salaries and ensure the smooth management of fixed costs without disruptions. This strategic move underscores the company’s commitment to weathering the storm and restoring stability.
Potential Impact and Future Outlook
The difficulties BYJU’S is facing affect not just the business but also its staff, investors, and the larger edtech sector. Employee morale and corporate trust may be impacted by the delayed salaries and valuation drop. Given its prior reputation as an edtech unicorn, investors are keenly observing BYJU’S response to these difficulties.
BYJU’s difficulties might also have an impact on the larger edtech sector, which has grown significantly in recent years. Given the regulatory scrutiny and financial difficulties experienced by a major player such as BYJU’S, investors and stakeholders could reconsider how they approach the industry.
In conclusion, BYJU’S is currently navigating through a complex web of challenges, ranging from operational issues like delayed salaries to broader financial struggles and legal disputes. The company’s ability to address these challenges and implement effective strategies will determine its trajectory in the competitive and dynamic edtech landscape. As BYJU’S works towards resolving these issues, the edtech industry is watching closely, recognizing the potential impact on the sector’s overall dynamics.
