From Tutor to Business Owner: Why the Biggest Startup Star is Struggling Financially Today – Discover Why - Indian Updates

From Tutor to Business Owner: Why the Biggest Startup Star is Struggling Financially Today – Discover Why

Ravi Jaishankar Yadav
6 Min Read
Why the Biggest Startup Star is Struggling Financially TodayWhy the Biggest Startup Star is Struggling Financially Today

Once, Byju’s name echoed from students to parents’ lips, but today, the company is teetering on the edge of bankruptcy. BYJU,S doesn’t have enough money left to pay salaries to its employees. The company’s founder, Byju Raveendran, has mortgaged his home just so his employees can be paid.

Once upon a time, Bollywood’s most expensive star, King Khan Shah Rukh Khan, used to endorse it. Its logo was on Team India’s jersey. From big billboards to newspaper headlines and YouTube banners, the biggest ship in the education technology sector has sprung a leak.

There was a time when its name was on everyone’s lips, but today it’s teetering on the brink of bankruptcy. The founder of the online learning app BYJU’S has had to mortgage his house to pay his employees’ salaries.

The company’s financial situation is dire, and BYJU’s founder Byju Raveendran is doing everything possible to handle it. He has mortgaged his home to pay salaries to the company’s 15,000 employees.

By July 2021, BYJU’s valuation surpassed that of Paytm. It had become the number one startup in the education technology sector.

The company had been acquiring one company after another, but within two years, its situation deteriorated to the point where they don’t even have money for salaries. Who’s responsible for BYJU’S current situation?

How did it start?

The situation of the edu-tech firm BYJU’S is worsening day by day. BYJUS’s is facing deepening financial troubles. Things have deteriorated so much that they don’t even have money left to pay their employees’ salaries, which wasn’t always the case.

Hailing from a village, Byju Ravindran elevated it to great heights. After working in a shipping company for years post-engineering, Raveendran tutored his friends, aiding them in the CAT entrance exam, which marked the beginning of his journey as a teacher.

Leaving his job, Raveendran started tutoring. The number of students in his classes kept increasing. Raveendran classes became famous under the name ‘Byju’s Classes’.

The country’s largest edtech company.

In 2007, Raveendran’s popularity soared. By 2011, he founded a company called Think and Learn, launching an online version of BYJU’S. Through online classes and videos, they reached students across the country. In 2015, he launched the BYJU’S app, becoming a game-changer and leading the company to become India’s top edtech firm by 2019, acquiring several companies along the way.

BYJU’S trapped in the web of debt

To run the business, the company needed funds on a large scale, for which Byju decided to take a loan of 1.2 billion dollars. The decision to take the loan turned out wrong for Raveendran. As the COVID situation improved, students started returning to schools, and BYJU’S user base began to decrease. Meanwhile, the US Federal Reserve started increasing interest rates, making borrowing more expensive. This led to a negative sentiment surrounding Byju’s associate companies.

Income decreased and losses increased

Raveendran invested money in three businesses to expand his business – first, an online learning platform; second, an offline tuition center; and third, the sale of SD cards and tablet courses.

The company expanded its feet, but the income did not increase. Byju was spending 150 crores every month on salaries and other things, but the company’s earnings were only 30 crores.

The company needed an additional 120 to 130 crores every month to run its core business. The losses of the company kept increasing. The burden of debt on the company kept growing. Byju needs to make a payment of around 2 thousand crores.

What will happen to the students?

The company has 500,000 active students enrolled for a three-year course. Each student has paid approximately 70,000 rupees as fees for this course. If the company shuts down, Byju will be responsible for refunding these students. Meanwhile, the company holds a term loan of 1.2 billion dollars. Byju is accused of defaulting on a payment of ₹158 crores.

In this situation, Raveendran is contemplating various measures to save the company. Selling assets could help gather funds for the company. Currently, Raveendran is brainstorming ways to rescue the company from this crisis. The company possesses mega assets akin to the sky.

BYJU’s difficulties increased

The Tech Investor Process has reduced BYJU’s valuation to less than $3 billion, whereas it was $22 billion last year. The decline in the company’s valuation has hit the company’s image.

Meanwhile, the ED’s notice has added to Ravindran’s difficulties. Byju is accused of violating FEMA by more than ₹9,000 crores. The company is left with no money for rent payments or to pay employees’ salaries, which has raised questions among people about the company’s credibility.”

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