New Delhi: Byju Raveendran, founder and chief executive of Byju’s has been in crisis mode for months. Apart from the raid by the Enforcement Directorate (ED), his once high-flying tutoring startup failed to file its financial accounts on time. Several US-based investors accused Byju’s of hiding half a billion dollars, prompting lawsuits. In late April, ED officials in plainclothes raided the Bengaluru offices of Byju’s, seizing laptops and publicly linking the world’s most valuable education-technology startup with possible foreign exchange violations.
According to reports, Raveendran was in Dubai at that time. With a planned $1 billion equity fundraise from Middle Eastern investors still in limbo, Raveendran broke down in tears defending his company, according to people who attended the calls. On Tuesday, Prosus NV, onByju e of the company’s earliest investors, said it had given up its board seat because of poor governance and disregard for directors’ advice, Bloomberg reported.
Byju’s and Raveendran have denied wrongdoing.
“If the situation is not contained quickly and guardrails are not put in place at Byju’s, it will affect India’s image as an investment destination among overseas funds,” Jacob Mathew, a chairman of investment banking at Incred Capital Ltd was quoted as saying by Bloomberg.
Raveendran’s meteoric rise and fall
Raveendran’s rise from a private tutor to the leader of a $22 billion company captivated global investors, including Sequoia Capital, Blackstone Inc. and Mark Zuckerberg’s foundation. During the pandemic, Raveendran cornered a majority of the ed-tech market in India.
But after classrooms reopened, concerns about Byju’s finances pricked at the firm’s reputation. Investors questioned why Raveendran delayed hiring a chief financial officer for years and acquired more than a dozen companies across the world at break-neck speed. Scores of employees have either left or been fired. Board members have resigned. And many teaching centers are nearly empty.
His story
Raveendran grew up in a village in Kerala and attended a local school where his father taught physics and his mother math. He was an unconventional student, according to people who knew him at the time, skipping classes to play football and preferring to teach himself at home.
After briefly working as an engineer, Raveendran began coaching students at a college in Bengaluru. Enrollment doubled every week, and Raveendran eventually moved classes into a sports stadium. Lessons were projected onto giant screens for thousands of students. He was adept at preparing students for fiercely competitive entrance exams to premier engineering and medical colleges. Raveendran recruited his best students to teach alongside him and opened 41 coaching centers. In 2011, he registered Think and Learn Pvt Ltd. – the parent company of Byju’s. He co-founded the firm with Divya Gokulnath, a biotech engineer and former student whom he later married.
In 2015, Raveendran digitized his business, launching a self-learning app focused largely on math, science and English for primary school students. “I’ve always enjoyed learning things on my own and also taught myself to hack exams, so it was easy to tutor others,” Raveendran said in a 2017 interview with Bloomberg News.
As capital flowed through the firm’s accounts, Raveendran acquired more than a dozen educational companies in India and abroad. When the pandemic pushed students online, the buyouts seemed prescient. Raveendran planned to take the company public through a SPAC merger. Some investors offered valuations as high as $48 billion, according to documents reviewed by Bloomberg.
Raveendran also tapped debt markets to fuel his acquisition spree. Though Byju’s sought to borrow only $500 million in 2021, overseas investors – including Blackstone Inc., Fidelity and GIC – put up enough cash to double the target size of the firm’s term loan B to $1.2 billion.
Cracks in the Edifice
But by the middle of 2022, problems began to compound. The SPAC boom petered out, along with demand for online tutoring. Employees questioned Raveendran’s business instincts: Even as the lifting of Covid restrictions battered ed-tech, he sought to raise more equity – rather than conserve cash and target profitability.
That strategy hit a snag last July when two key investors failed to transfer about $250 million – part of the announced $800 million round – because of “macroeconomic reasons.” People familiar with the deal said Raveendran didn’t verify whether the investors had enough money before announcing the deal. (The funds never came through.)
Meanwhile, ED officials sent queries to Byju’s about why the firm couldn’t close its financial accounts for the fiscal year ending March 2021. It sent summons to company officials. Charges weren’t filed against Byju’s after the raid in late April. But the Ministry of Corporate Affair will soon decide whether to open a formal probe, Bloomberg reported this month.
Eighteen months after the financial year’s close, Byju’s finally released audited statements. They showed losses of Rs 45.7 billion – a 13-fold jump from the previous year, the report added.
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