Byju’s Downfall: What’s Next For The Edtech Giant After A Billion-Dollar Collapse?

Byju’s, once a billion-dollar company, has been accused of misleading advertisements, forced subscriptions, data privacy issues, poor educational discourse, and inappropriate sales practices. The effect of such accusations has been drastic for Byju as the company reported a net loss of ₹8,245 cores, double the losses incurred in the previous year. The company’s valuation dropped from $22 billion to below $1 billion in 2022-2023. A  US subsidiary of Byju’s filed Chapter 11 bankruptcy, where the unit listed liabilities worth $1 billion to $10 billion. What went wrong, and how can the company recover from this situation?

What was Byju’s accused of?

First, let’s understand the accusations made before understanding the response and contingency plans of the accused. The company, which once claimed to be the largest ed-tech business in India, has faced accusations of illegally transferring over $533 million from a US shell enterprise, which had to pay $1.2 billion in loans to its creditors. In response, Byju defended itself by proclaiming it as an intentional defamatory target of some predatory lenders.

Apart from accusations of illegal transactions, the company has been accused of severe financial mismanagement and compliance irregularities. For example, Byju has been charged with breaching loan agreements with its US lenders and evading payments, which are necessary for maintaining an ethical and sustainable business reputation and progressive business growth in India and other international regions.  

In addition, the company had delayed the submission of necessary financial statements, which hindered its creditors’ ability to evaluate accounts and overall economic stability. Byju also faced multiple accusations from its creditors, including big names such as BCCI, Oppo, and Surfer Technologies, as the company was found not complying with its sponsorship agreements. The then CEO of Byju’s, Byju Raveendran, was accused of manipulating and effectively misleading the Karnataka HC in a hearing associated with insolvency.     

Accusations made by parents

Now, let’s look into the details of accusations that the parents made against Byju concerning its staff’s unethical, manipulative tactics to get subscriptions to its varied ed-tech plans and offers. The sales staff of the company was allegedly forced to meet unachievable sales targets, which sometimes made them move and manipulate vulnerable parents to buy forcibly their ed-tech services.

Allegedly, parents of students were aggressively pursued by the sales staff of the company to consider buying their ed-tech offers with promises indicating cashback and refunds if proper classes were not conducted or any irregularities occurred throughout the tenure of their subscription plans. Many parents also allege Byju of buying the phone numbers of students to breach personal information about their private life and lifestyle.

The ed-tech services of Byju were provided to parents from unprivileged and underserved areas where they sometimes could not bear or afford to pay off the tuition fees in one go. So, the company took a different approach to responding to this problem, initially seeming highly ethical and empathetic. The parents were provided with EMI tuition fee schemes for the entire year, with the privilege of paying the whole amount in monthly instalments. However, the scheme was highly problematic as parents paying these EMIs could not discontinue even when the institution’s teachers did not conduct regular classes and provide appropriate facilities to support essential learning.

Accusations of working staff

The reports indicating Byju’s unethical workforce management approaches show more than 280 employees who have filed grievances demanding immediate action concerning unpaid salaries and taxes, which were withheld from their monthly wages. In many reports, employees of Byju have raised concerns concerning the company’s financial stability and how it might go bankrupt if severe organisational changes are not introduced. As per allegations, the HR team of Byju was further accused of providing vague replies and sometimes no answer to the queries and complaints of its staff. Recently, videos displaying the offensive and rude behaviour of the managerial staff of Byju have surfaced all over the internet, showing how employees in the organisation are treated daily.  

What’s happening to the company after its massive downfall?

Now, one will question what the company did in response to these allegations, its insolvency complications, and its financial challenges. Well, the answer is “not enough”. The damage to Byju’s reputation was so severe that it is unlikely that the company will recover from the enormous financial complications soon. However, the CEO, possibly along with other internal stakeholders, made substantial efforts to ensure proper cash flow and reduce operating costs. Since 2023, the company has sacked more than 2500 employees, including teachers, and is expected to lay off 1500 more in the long run. The impact of these lay-offs was drastic as they affected the tuition centres and inefficiently provided required education to registered students.

Byju also decided to prune its excess marketing costs and technology expenses, which have been one of the key factors affecting its ROI (Return on Investments) and profit outcomes. A few non-performing assets, including products and verticals, were also discarded as they failed to generate enough revenues through which the company could pay off its financial dues. The entire restructuring was named BYJU’S 3.0, which had little effect on revitalising the brand reputation of Byju in the long run.

It will take a lot more for Byju’s to regain traction and continue selling their services to the Indian consumer base. The accusations are so severe that internal solid changes and restructuring are required, which can further degrade Byju’s current financial capabilities. However, it is good to see that Byju has made severe changes, where the existing board was expanded to 9 members, including the founder, two executives, three independent directors and three internal stakeholders.

After seeking consent from its internal council members, the CEO appointed two non-executive members. Raveendran will step down, and an interim CEO will be appointed to continue overall restructuring. Additionally, the CEO hired a third-party agency named Kroll to safeguard its assets and manage funds to gain stability and justifiable monetary returns in the long run.   

Recently, Byju’s has considered selling its US-based children’s digital asset, Epic, to gather funds amidst severe financial distress. The positive side is that they have received offers worth over $400 million, which can prove helpful and facilitate the company to mitigate its degrading financial situation and make efforts to bring necessary structural changes in the future.  

What did Byju’s massive growth and downfall reflect on the Indian education system?

Positive Side

Byju’s unprecedented growth shows societal acceptance of a change which aims to replace traditional learning discourse with a more sophisticated and technologically driven learning procedure. It is a proud moment for India as it symbolises the advent of a more detailed educational process compared to immoral and irregular learning procedures, which dull the shared consciousness of individuals of what is right and wrong education. The acceptance of technology by people in rural and underserved parts of India indicates the progressive growth of a community, which can further open up new possibilities for more ed-techs to emerge and a scope of traditional educational institutions to incorporate technological advancements in regular classrooms.

Negative Side

The rise of ed-techs questions the current discourse of essential education by conventional schools and colleges in India. The argument supporting the inefficiency of traditional Indian schools in providing quality-based education indicates that emerging ed-tech is filling a gap. Unlike these existing institutions, they promise better education and a systematic routine through which students of different subjects and genres are taught and educated.

It is important to note that educational reforms are equally crucial compared to economic and societal reforms as they facilitate the development of a generation of future scholars capable of propagating the proper sense of morality and education to future generations. It is subsequently essential to ensure that such education is delivered from traditional public schools rather than institutions that propagate educational notions for personal benefits and mainly for profit. If this is ensured, allegedly corrupt and dishonest ed-techs like Byjus will have no space to empower or manipulate the young minds of this nation into believing in false ideologies and practices surrounding the notion of suitable education.

Verdict

Byju’s current financial problems are a mere consequence of internal errors and disputes that every ed-tech intending to grow in India must consider. It is vital for emerging institutions to never engage in financial misdeeds and opt for a more sustainable way of growing. It is essential to consider as it can lead to mass resentments, which, in this case, has been responsible for exposing Byju to a situation impossible to recover from. It is essential to consider ethics over profit, as profit without ethical values will permanently pause operations and disrupt existing brand reputation and scalability.

It will also create competitive disadvantages, which are hard to come out of, as seen in the case of Byju. It is essential to understand the difference between marketing and propagating lies and misleading content, as the latter will cause public outrage, which might result in consumers not trusting services and opting for facilities similar to those of other competitors.

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