BYJU’S Vs Bankruptcy: Will The Edtech Giant Survive The Existential Insolvency Crisis?

There’s no end to the bad times at BYJU’S. Three new developments threaten to kill the edtech giant, once the highest-valued startup in India and considered the crown jewel of the Indian startup ecosystem till just three years ago.

• Firstly, the National Company Law Tribunal (NCLT) has admitted a plea by the Board for Control of Cricket in India (BCCI) to initiate a corporate insolvency resolution process (CIRP) against BYJU’S. Another insolvency plea by US-based lenders has also been tacked on to this resolution process.
• Secondly, the company has had to walk away from 100s of its offline coaching centres, as Inc42 reported exclusively this week.
• And third, there are reports that BYJU’S has allegedly not remitted the tax deducted at source (TDS) to the Income Tax department since July last year

Either one of these can lead to an existential crisis for a company, but all three together — and the dozens of other problems at BYJU’S — threaten to bring the Byju Raveendran-led company to its knees. For instance, BYJU’S is also caught in a crisis where investors are looking to step in and wrest control of the company which is said to be out of funds. In a bid to survive for as long as possible, BYJU’S has cut more than 5,000 jobs since 2022.

The company’s many troubles have dented investor confidence considerably, with shareholders taking the company to court over a contentious rights issue, where the company is seeking fresh funds at a post-money valuation of $225 Mn. That’s a 99% drop from its valuation of $22 Bn in 2022.

But in particular, it is the NCLT order that can change the entire course of the company, which claims it is in discussions with the cricketing body for a settlement.

“As we have always maintained, we wish to reach an amicable settlement with the BCCI and we are confident that, despite this order, a settlement can be reached. In the meantime, our lawyers are reviewing the order and will take necessary steps to protect the Company’s interests,” a spokesperson for the company said.

As per a Reuters report, BYJU’S plans to challenge the NCLT order and will file an appeal in Delhi to block the insolvency proceedings.

In the meantime, the NCLT has appointed insolvency professional Pankaj Srivastava as the interim resolution professional in the BCCI matter. In addition to the plea by the BCCI, Srivastava will also hear the insolvency pleas of US-based lenders of BYJU’S Term Loan B, as ordered by the NCLT earlier this week.

For now, the company has moved the NCLAT to appeal against the insolvency process. There’s no certainty that the appeal will be successful. So what does it mean for BYJU’S and its future, if the CIRP is allowed to go on.

BYJU’S Existential Crisis

As per India’s Insolvency and Bankruptcy Code, 2016 (amended in 2021), the corporate insolvency resolution process or CIRP will commence from the admission date of the application by NCLT. Here’s a snapshot of what the CIRP entails:

While the insolvency resolution process will take several months to be settled, BYJU’S will also face headwinds in its business operations.

As Inc42 reported, the company has had to scale back its offline coaching vertical due to unpaid rent and other utility bills. This is said to have impacted more than 100 outlets out of a total of 260+ such centres that the company operates. Given the halving of this business, BYJU’S is left in a limbo.

It doesn’t help matters that the online learning business cannot make up for the slowdown on the offline front. BYJU’S inside sales efforts have not paid off and the company is running without many of the resources it relied on in the past — such as SaaS tools for CRM and sales monitoring.

Online-first is no longer the edtech DNA. It’s not just BYJU’S that is grappling with challenges in selling online learning. The industry as a whole is seeing some headwinds.

As a CEO of a rival edtech company, which also has a significant presence in the offline space, told Inc42 in May this year, the troubles for BYJU’S have hurt the Indian edtech sector. “We were only able to achieve 40% of the targets set for online courses, while offline coaching has seen more students each year.”

Earlier, upGrad’s Ronnie Screwvala also said, during an address at February’s ASU+GSV & Emeritus Summit, that due to ‘one rotten apple’, the industry is seeing reputational damage.

But the ground reality is that from Physicswallah to Unacademy to Vedantu and other edtech platforms,the focus is on offline and hybrid online-offline models where there is a more clear revenue opportunity. Many of these companies have their own share of problems — Unacademy’s attrition in leadership ranks and PhysicsWallah’s gamble on multiple products — but none of them are in a similar precarious financial position as BYJU’S.

So far, BYJU’S was paying salaries from the revenue it generated from monthly sales, as was seen in May 2024. But given that offline business has now shut down in many locations, can the company actually stay afloat on this monthly revenue collection alone?

Surviving The Insolvency Storm

What makes matters worse for BYJU’S is that any revenue that it books at this point in the year can only be recognised in the next year. “Edtech courses being sold right now are for FY26 now. For FY25, the sales cycle concluded around May 2024, which means that most companies are now targeting the next batch of students. This means revenue can only be recognised for the next year, even if sales are completed at this point in time,” according to the founder of an edtech startup that has offline presence.

Besides this, BYJU’S and edtech in general has suffered a reputation damage in the past two years. As a result, students and parents are preferring traditional offline coaching giants over edtech startups with hybrid operations.

Reports claimed the monthly salary burn for BYJU’S in April 2024 was between INR 40 Cr ($5 Mn) to INR 50 Cr ($6 Mn). Besides this, the company is saddled with a backlog of salary and the dues owed to the various vendors, which we have covered in detail here.

It’s unclear how BYJU’S can be revived, if indeed such a thing is possible. One thing is for certain, the company’s brand image has taken a beating and for the sake of business continuity, this needs to be addressed on priority basis.

Even if there is a settlement reached with the BCCI and the company staves off insolvency proceedings for now, there’s no guarantee that BYJU’S will see a similar positive result with its Term Loan B lenders. There’s also the matter of the rights issue — two separate instances — that is being heard by the Karnataka High Court and the NCLT.

Like we said at the start, this is an existential crisis for BYJU’S. From being heralded as the poster child of the Indian startup ecosystem to a cautionary tale on what not to do, the edtech giant has crashed and this is not just a matter of raising funds to extend the runway and keeping the business going.

As we have seen over the past year — ever since three directors and an auditor resigned prematurely — the current crisis is about a series of bad decisions by Byju Raveendran and the management over the years. Besides Raveendran and cofounder Divya Gokulnath, the large number of global investors and VC funds who invested in the edtech giant also need to introspect about what went wrong.

We will be looking at the investor side of things next as the BYJU’S saga plays out. What exactly will the shareholders be left with if the company goes under the auction hammer? And is there a sense that they could have arrested BYJU’S slide much before the company entered this crisis?