Technology

Byju’s cuts further 1,000 jobs amid financial and legal woes Indian edtech has suffered post-pandemic fall in demand for online learning services

The online learning group, which says it has 150mn students, made fresh staff cuts in recent days, two people close to the company said. It had already shed several thousand employees starting last year, as it integrated acquired rivals.

Byju’s, which sponsors the Indian cricket team and was previously endorsed by Bollywood billionaire actor Shah Rukh Khan, had been a poster child for India’s start-up sector, mounting an international expansion drive and attracting the backing of investors from China’s Tencent to US hedge fund Tiger Global. However, it has struggled with a financial crunch as global investor appetite for lossmaking start-ups in India and beyond has waned since the pandemic.

The staff cuts come as “investors would be looking to Byju’s to show some visibility towards profitability”, said Nirgunan Tiruchelvam, head of consumer and internet at Aletheia Capital in Singapore. Such investor demands were common to “pandemic stocks which were given leeway” during the years of low interest rates, he added.

The job cuts come amid a bitter legal dispute in the US between Byju’s and holders of its $1.2bn dollar-denominated term loan. That has escalated this month, with Byju’s refusing to make a $40mn payment and counter-suing lenders.

The lenders allege Byju’s has technically defaulted on the loan and have used a legal challenge in Delaware to try to force the company to accelerate payment. However, lawyers for Byju’s described the default allegations as “bogus” and accused the lenders of “bad-faith negotiating tactics”, in a complaint filed in New York seeking damages.

The company had ridden growing interest in online learning during lockdowns to raise more than $2.5bn in equity from investors, touching a valuation of $22bn and making a series of high-profile acquisitions, which included American start-ups. At its peak, Byju’s employed as many as 50,000 people.

Yet financials for the year ended March 2021, the most recent available, showed that even during the pandemic-era rush its revenues stagnated and losses soared to $560mn. Educational technology companies were also particularly hard-hit by the drop in demand for online learning once schools reopened.

Byju’s shed 2,500 employees last year and imposed more staff cuts this year, according to media reports. Byju’s declined to comment. Byju Raveendran, the company’s eponymous founder, told a television interviewer in January that the company had already “optimised on the people front” and didn’t “need to do much” to become financially sustainable. 

The group has yet to show whether it has been able to contain its losses and justify its lofty valuation, as it has not released results for the year that ended in March 2022

But some investors have drastically cut their implied valuation of Byju’s. BlackRock now values its investment in Byju’s at $1,774 per share, down from $2,243 per share when the US investor bought into the company in 2020. BlackRock’s new share price estimate would give Byju’s an implied valuation of just under $8bn.

“Companies were raising way ahead of where they should have been, and then valuations fell off the cliff,” said Sanjay Swamy, managing partner at Bengaluru-based venture capital firm Prime Venture Partners. “Now the pendulum has swung the other way, probably highly undervaluing some of these companies.”

Funding of Indian start-ups fell 75 per cent to $2.8bn in the first quarter of 2023, compared with nearly $12bn a year earlier, according to figures from data provider Tracxn. 

“A lot of companies had overhired in the last hype cycle,” said Neha Singh, Tracxn’s founder. While during the pandemic parents embraced online education, now “parents want their children to go back to school and reduce their screen time”.