BYJU’S effects : ₹ 8,245 Cr losses in Final Year 22

How much byju’s losses in fy22-23?

After a 22-month delay, edtech firm Byju’s has submitted its audited financial statement for fiscal year FY22, offering the company brief relief, but also raising more concerns for its future.

Think & Learn Pvt. Ltd, Byju’s parent, saw its consolidated revenue more than double to Rs 5,015 crore in FY22 from Rs 2,280 crore the year before. Notably, approximately 58% — or about Rs 2,900 crore — of its overall revenue came from its core business of selling video lectures recorded on SD cards and tablets.
Its crown jewel — Aakash Educational Services – reported a 40% revenue growth to Rs 1,491 crore in FY22. The offline coaching arm had separately reported that its profit grew 82% to Rs 79.5 crore for the fiscal. Great Learning, one of its promising subsidiaries that Byju’s has put on sale alongside US-based Epic, saw its revenue grow 1.8x to Rs 628 crore in FY22 from Rs 354 crore the year before.

With the core business showing growth, Byju’s finds a reason to celebrate; however, the looming concern for potential investors lies in the weight of its accumulating debt and mounting losses. Its consolidated loss for 2021-22 ballooned to Rs 8,245 crore from Rs 4,564 crore in FY21.
WhiteHat Jr. and Osmo, acquired by Byju’s in 2020 and 2019 for $300 million and $120 million respectively, dealt a significant financial blow to the company. Together, they contributed to approximately 45% of Byju’s losses, totaling around Rs 3,800 crores. In FY22, WhiteHat Jr. saw a 10% decline in revenue to Rs 295 crore, while pre-tax losses surged nearly 1.6x to Rs 2,358 crore. Osmo’s revenue dropped 8% to Rs 553 crore, and losses widened more than 4x to Rs 852 crore from Rs 191 crore in FY21.

“The audit was of past records and the financial position of the company as of 31st March 2022, the report is based on the then cash position, the debt obligations, the contingent liabilities. The financial situation in the past two years would have further deteriorated. If anything, Byjus is a zombie company,” says Shriram Subramanian, Founder and Managing Director of InGovern Research Services, a corporate governance advisory firm.
Losses are expected to decrease significantly for these two entities as the company over the past two years has significantly cut the costs around them, including reducing their employee count. White Hat Jr, the real white elephant, is also rebranded and its assets have been integrated into other business verticals.

However, the company’s crucial challenge lies in its ability to secure much-needed fresh funding, especially considering its recent struggles to meet timely salary payments.

As per the sources BT spoke to, the company now attempting to raise $100 million via a rights issue from a group of existing lead investors. The round will value the company at around $500 million to $1 billion. The fund will be used to meet some of its immediate liabilities, including vendor payments, and to clear the unpaid dues to BCCI.

“Some of the late-stage investors have agreed to put some money at a much-reduced valuation, which is now being discussed in the range of $500 million to $1 billion. They (investors) are showing interest because it will help them reduce their average cost of share acquisition significantly. Byju (Raveendran) is looking to pool in about $15-20 million from a 6-7 of them, he has already received commitments from a few,” said a person aware of the developments.
While the auditor has issued an “unqualified opinion”, signifying no red flags in accounting practices, the cautionary note from the auditor warning of “material uncertainty” and expressing doubts about its ability to continue as a going concern adds a layer of complexity to the fundraising efforts.

“Due to, continuing net losses from operations and accumulated losses, in addition to, the uncertainty related to the outcome of the litigation and its financial impact thereon, in respect of the $1.2 billion Term Loan B facility availed by Byju’s Alpha Inc., a step-down subsidiary, where the Think and Learn has issued a guarantee. These events and conditions, indicate that a material uncertainty exists that may cast significant doubt on Company’s ability to continue as a going concern,” auditors observed.

Though the company said the TLB is not an immediate concern, given it is in litigation, industry observers say it could hurt its prospects.

“The auditor’s report paints a concerning picture of the company’s health. In the opening sentence, the auditor explicitly states that the company lacks the ability to continue as a going concern. However, the subsequent sentence introduces a disclaimer, suggesting that, based on a legal opinion regarding debt repayment, the company could be viewed as a going concern. This analogy can be likened to promoting a student to a higher class solely for excelling in a drawing class, raising questions about the overall assessment of the company’s viability,” Jidesh Kumar, managing partner at King Stubb & Kasiva Advocates and Attorneys, said.
While its newly appointed CEO Arjun Mohan is overseeing an aggressive payroll and non-payroll cost reduction drive, merging many different verticals and innovating on the course structures to improve cash flow, the company lacks the luxury of time to wait for sufficient cash flow to sustain itself, and there is no respite expected from the looming pressure of time-sensitive loan obligations.

“The company has indeed cut its size; it is only a skeleton of its past today and it has to become much leaner to survive. But look at the mounting debt and the size of its losses. Byju’s future hangs by a thread today. It all depends on how soon it can bring in a fresh infusion and how quickly it can sell those assets to pay off the debt,” said a venture capital investor.

While the FY23 fiscal report is poised to inject a glimmer of optimism, when it arrives, the real challenge lies in how the company navigates the storm and regains its footing before facing a potential catastrophic downturn.