BYJU'S: Is India's most valuable unicorn in serious trouble?
BYJU'S, the world's most valuable edtech company, has opened a can of worms with the release of its FY21 financials after an 18-month delay. The report spelled a decline in revenue, a huge increase in losses, and a rise in expenses. Given the kind of success that most tech companies enjoyed in FY21, this report of BYJU'S has raised many questions.
Why does this story matter?
BYJU'S, India's most valuable unicorn, has been in hot water for a while. The recently published FY21 report has only added to its woes. Many have started questioning the company's aggressive business strategy. The same strategy that was successful once has proved to be not as beneficial these days. Several of the company's actions have also attracted scrutiny from the Centre.
BYJU'S saw a nearly 2.5 times YoY increase in expenditure
For the financial year that ended in March 2021, BUJU'S posted a revenue of Rs. 2,428 crore, 14% lesser than the revenue in FY20. The company's loss in FY21 was Rs. 4,588 crore, up from just Rs. 260 crore in FY20. At the same time, the start-up's expenditure swelled from Rs. 2,873.34 crore in FY20 to Rs. 7,027.47 crore in FY21.
Why are BYJU'S FY21 results surprising to many?
BYJU'S delayed FY21 report has made many heads turn. The company's finances during a year when edtech start-ups benefited heavily due to the COVID-19 pandemic have surprised many. In a year like that, when the world's most valuable ed-tech start-up posts a decline in revenue, it ought to invite tighter scrutiny of projections by investors in the future.
What does BYJU'S have to say about revenue decline?
According to BYJU'S, the decline in its revenue in FY21 is due to a new revenue recognition method. And, Rs. 1,156 crore was not recognized as these transactions did not meet the new criteria. They will be recognized only when the company receives all of the consideration or when the deferred payment terms end. Almost 40% of its revenue is deferred to subsequent years.
The company has been making too many acquisitions
The last couple of years have seen BYJU'S making some big acquisitions. WhiteHat Jr, a start-up BYJU'S acquired in 2020 for $200 million, has made a significant contribution to the company's consolidated loss in FY21. Investors have been watching the company making acquisitions during ballooning losses. If BYJU'S wishes to turn it around, it will need to shed non-core assets.
Company has been accused of selling misleading course material
BYJU'S has been under pressure from regulatory authorities as well. The delay in publishing the FY21 report card invited a lot of flak from the Centre. Moreover, the company has also been accused of selling misleading course content and study materials. There have been talks about the company's hard-selling tactics as well. The government has expressed concerns over these malpractices.
