BYJU’S FY22 outcomes: While the core business expands, increasing losses and debt initiate a race against time for survival

After a 22-month postponement, Byju’s, the edtech firm, has finally submitted its audited financial statement for FY22, bringing momentary relief but also triggering additional worries for its future.

Think & Learn Pvt. Ltd, Byju’s parent company, experienced a significant surge in consolidated revenue, surpassing Rs 5,015 crore in FY22, more than doubling from the previous year’s Rs 2,280 crore. Notably, around 58%—approximately Rs 2,900 crore—of its total revenue originated from the core business of selling video lectures stored on SD cards and tablets.

Aakash Educational Services, the prized asset, registered a 40% revenue surge to Rs 1,491 crore in FY22. The offline coaching wing reported an 82% profit increase to Rs 79.5 crore for the fiscal. Great Learning, a notable subsidiary on sale with US-based Epic, witnessed a 1.8x revenue growth to Rs 628 crore in FY22 from Rs 354 crore the previous year.

While the core business displays growth, Byju’s has reasons to rejoice; however, the accumulating debt and rising losses pose a significant concern for potential investors. The consolidated loss for 2021-22 escalated to Rs 8,245 crore from Rs 4,564 crore in FY21.

By acquiring WhiteHat Jr. and Osmo in 2020 and 2019 for $300 million and $120 million, respectively, Byju’s faced a substantial financial setback. These acquisitions collectively contributed to about 45% of Byju’s losses, totaling around Rs 3,800 crores. In FY22, WhiteHat Jr. experienced a 10% decline in revenue to Rs 295 crore, with pre-tax losses surging nearly 1.6x to Rs 2,358 crore. Osmo’s revenue dropped 8% to Rs553 crore, and losses widened more than 4x to Rs 852 crore from Rs 191 crore in FY21.

“The audit focused on past records and the financial position as of March 31, 2022. The report considers the cash position, debt obligations, and contingent liabilities at that time. The financial situation in the past two years may have further deteriorated. If anything, Byju’s is akin to a zombie company,” remarked Shriram Subramanian, Founder and Managing Director of InGovern Research Services, a corporate governance advisory firm.”

Anticipated reductions in losses for these entities stem from substantial cost-cutting measures, including employee count reductions, implemented by the company over the past two years. White Hat Jr, a significant financial burden, undergoes rebranding, with its assets integrated into other business verticals.

However, the company’s pivotal challenge centers on securing essential fresh funding, especially amid recent struggles to meet salary payments promptly. The company is currently seeking to raise $100 million through a rights issue from existing lead investors, with an estimated valuation in the range of $500 million to $1 billion. The funds will address immediate liabilities, including vendor payments and outstanding dues to BCCI.

“Some late-stage investors are considering investing at a significantly reduced valuation, estimated between $500 million to $1 billion. Their interest lies in reducing the average cost of share acquisition. Byju (Raveendran) aims to gather $15-20 million from 6-7 investors, with commitments already received from a few,” revealed a source familiar with the developments.

While the auditor issues an “unqualified opinion,” indicating no concerns in accounting practices, the cautious note raises complexity in fundraising. The auditor expresses doubts about the company’s ability to continue as a going concern, citing continuing net losses, accumulated losses, and uncertainties linked to litigation’s outcome and its financial impact on the $1.2 billion Term Loan B facility. Though the company downplays immediate concerns due to ongoing litigation, industry experts believe it may negatively impact its prospects.

“The auditor’s report presents a concerning company health. Initially stating the lack of ability to continue as a going concern, a subsequent disclaimer introduces the possibility, based on a legal opinion regarding debt repayment. This raises questions about the overall assessment of the company’s viability, akin to promoting a student solely for excelling in a specific class,” remarked Jidesh Kumar, managing partner at King Stubb & Kasiva Advocates and Attorneys.

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