Qatar Airways, Kia, and Byju’s.

What’s common between these three companies?

These three companies are the sponsors of the FIFA 2022 World Cup.

Byju’s is the first Indian company to be the official sponsor of such a huge sporting event.

But look at this.

Last year, Qatar Airways’ revenue was 1 lakh crore.

Kia’s revenue was 4 lakh crores.

Guess how much Byju’s revenue was?

Just 2.5 thousand crores.

2.5 thousand crores might look like a huge figure.

In their latest financial report, Byju showed how their revenue was 24 lakh crores.

But their loss was 4600 crores.

And guess what Byju’s valuation is?

22 billion dollars.

This means Byju’s is India’s most valuable startup.

So why is the loss of a 22-billion-dollar company worth 4600 crores?

That’s what I want to tell you in this article.

Why is Byju failing?

Last year, people were very optimistic about Byju.

Because Byju’s was about to be an IPO in New York, not in Bombay.

So Byju was about to become a public company like Apple and Facebook.

But that didn’t happen.

The whole story changed in a year.

There are four reasons behind it.

First, there’s a company under Byju’s that you all know.

(“Every Indian child will learn coding on whitehatjunior.com and make apps.”)

Gunjan Kumar from Gurgaon was very happy when he got an email from White Hat Junior.

He was told that his son has become the world’s youngest certified Android developer.

Gunjan Kumar was delighted after reading this email.

At such a young age, his son was making mobile apps.

But a year later, the situation changed.

Gunjan’s son didn’t know what to do after making mobile apps. After class 10, he stopped coding.

But two years ago, everyone wanted to learn coding during COVID. You must have seen a lot of ads by White Hat Junior.

(“Learn to code and change the world!”)

(“Now every Indian child will learn to code, make apps, and change the world.”)

How children aged 6-7 are lending jobs at Google and giving talks at TED.

White Hat Junior promised the parents that their children’s future will be bright.

Many people like Gunjan believed in White Hat Junior.

They paid Rs 70,000 for a year’s course.

But Gunjan realized that the course didn’t benefit him.

Many start-ups used Bill Gates’ stories for marketing.

They said, “you can become a billionaire like Bill Gates.”

Bill Gates was smart indeed, but he didn’t establish a big company when he was 10 that made him a billionaire overnight.

Microsoft saw many ups and downs.

Microsoft Success Story.

This was the story of Gunjan’s son.

Snehanchu Mandal also had a story.

He also tried to teach coding to his 10-year-old daughter.

Since he’s a software engineer, he believed that his daughter would understand the foundation of coding from White Hat Juniorwhich would enhance her creativity.

He said that White Hat Junior’s teachers didn’t teach the kids basics.

They taught them to develop apps with too many detailed instructions.

“Click on M4 mode.”

“Now click on Animals.”

Snehanchu said that White Hat Junior tried to feed the kids.

But the parents later realized that there were no vegetables or nutrition in this food.

It could also be that the parents’ expectations were wrong.

They wanted instant results.

How can they expect instant results without being taught the foundation?

Since many parents have realized that their kids aren’t benefitting from White Hat Junior, it’s becoming difficult for the company to win new customers.

White Hat Junior was teaching coding to its kids before, but now it’s teaching music and art classes.

An EdTech founder said that it’s like Haldiram selling Chinese food.

We can see this in the White Heart Junior report.

See for yourself how low the revenue is and how much loss it has incurred.

Apart from customers, many employees are leaving White Hat Junior.

A few months ago, around 800 employees resigned from White Hat Junior.

Another factor for the loss is that the classes White Hat Junior offers are one-on-one sessions.

This means that they’re expensive.

This is why many middle-class Indian parents can’t afford those classes.

Hence, it’s difficult for the company to win many customers in India.

This is why the founders of Byju’s want to expand White Hat Junior to other markets.

To launch it in a different country, the company needs more money.

This is why White Hat Junior is responsible for 26% of Byju’s losses.

This is why White Hat Junior is the biggest loss-making company in Byju.

Many experts believe that the trend of coding has eroded now that COVID is over.

So, Byju should shut down White Hat Junior.

But the founders of Byju’s don’t want to do that.

They said that White Hat Junior might be an underperformer, but it has had a huge impact on Indian teachers and students.

So, White Hat Junior is the first reason behind Byju’s immense loss.

The second problem is that like White Hat Junior, other subsidiaries of Byju’s are performing poorly as well.

For example, listen to this recording between Byju’s manager and salesperson.

(“I don’t care about your efforts. I just need numbers tomorrow, man. Anyhow.”)

Such things have become very common in Byju.

It has a very negative and toxic sales culture.

Sales executives are put under a lot of pressure to sell Byju’s courses.

The pressure has increased so much that many times sales executives fake their sales figure to show their managers that they’ve achieved their targets.

Why is Byju failing?

Let me give you an example.

Suppose you’re a salesperson and you’re targeted to do one sale by the end of each day.

If you fail to do that, your managers will ask you to pay a down payment of Rs. 15,000 to register a sale of Rs. 2.5 lakh.

Many times, managers ask sales executives to collect Rs. 1,000 from each executive so that they can collect the down payment quickly.

The system shows that the sales were done by the executive whose performance was the worst among the team.

Byju’s sales teams do this because if they fail to meet the target, they’ll be fired.

That’s why all the teams have set up a strategy to pay from their own pockets.

This means that none of us will lose our jobs.

All these sales are fake.

(“This is a huge bluff.”)

These fake sales are also mentioned in Byju’s financial statements.

After a while, the seniors of Byju’s understood how the system had been functioning.

That’s why Byju’s official revenue has been reduced.

This is one reason why Byju’s revenue has dropped by 60% in a year.

Though Byju is earning money from the US and Middle East countries,

the profit from there doesn’t cover the losses of its Indian businesses.

The third reason is marketing.

These are Byju’s brand deals with the Indian Cricket team and the FIFA World Cup.

As you can see, these are big events involving high-profile players.

To sign them all as brand ambassadors, Byju’s had to pay a lot of money.

Byju’s spent more than Rs 2,000 crores on marketing last year.

Byju’s 32% of spending was for marketing last year.

Byju’s strategy is to win customers in other countries using its huge investment in marketing.

So, they’re willing to incur a loss in short term to secure a profitable future.

But only time will tell whether Byju’s will benefit from this marketing or not.

The last reason is accounting.

This is a bit complex so let me explain it a bit carefully.

Around two months ago, the Indian government asked Byju’s CEO to publish the company’s financial results.

Byju’s responded by saying that the auditor, Deloitte, hasn’t approved his accounts yet.

The reason behind this is that his auditing company noticed something interesting.

His accounting company found that Byju was exaggerating its revenue.

To understand this, we need to understand how Byju earns money.

It does so in three ways:

• First, it earns money through live tuition.
• Second, through pre-recorded courses.
• And finally, by selling tablets and memory cards.

You’ll be surprised to know that Byju’s makes more than 80% of its revenue from selling tablets and memory cards.

There’s an interesting thing here.

Let’s say that Byju’s is selling you a tablet containing exam papers that you can use offline.

It’s priced at Rs 10,000.

Say, you don’t have Rs 10,000.

So, you’ll pay Rs 2,000 in down payment and Rs 8,000 in interest.

Thus, currently, Byju’s actual revenue is Rs 2,000.

The company will get Rs 8,000 in the future.

But Byju’s would add Rs 10,000 to its revenue.

It’s possible that some customers might not pay the total amount, and some might even cancel the course.

In that case, Byju will never recover the sum of Rs 10,000.

Despite this, it’ll add the sum to its revenue.

These are the four reasons why Byju’s suffered such a huge loss.

But the CEO of Byju’s isn’t worried.

He said that the media has been spreading rumours.

And he’s been solving the issues.

For example, he’s trying to stop fake sales.

But business analysts are sceptical about Byju’s ever solving its problems.

Byju also believes that its company, White Hat Jr., will soon be profitable.

As it has recently acquired Akash Institue, it hopes to profit from it.

Byju believes that it’s not selling only one product.

It has many products, and operating in many countries.

So, it’s natural for it to face challenges with one country or one product.

We’ll have to wait for a couple of years to know if this is true.

But what we can say for sure is that EdTech companies like Byju’s have a rough road ahead.

Take a look at this graph.

In 2021, during the COVID-19 pandemic, many new EdTech companies emerged in India.

But as soon as COVID-19 ended and children returned to schools and colleges,

many people are not using products from such companies.

People believe that 2021 was a honeymoon period for such companies.

And now this period has ended.

The road ahead is pretty rough.

Hopefully, you liked this article.