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Why is Byju’s, India’s most valuable start-up once valued at $22 billion, fighting for survival?

In 2018, Byju Raveendran’s edtech company, Byju’s, was the darling of India’s start-up scene.

It was valued at a staggering $22 billion. However, recent times have seen its fortunes take a dramatic downturn.

Financial Crisis and Valuation Plunge

Once India’s leading privately-held company, Byju’s is now regarded as a cautionary tale. Investment company BlackRock recently slashed its valuation to a mere $1 billion.

The company faced mounting debt, unhappy investors, and lawsuits by lenders. Its valuation plummeted.

Leadership Turmoil

In February, many shareholders voted to remove Byju Raveendran as CEO during an extraordinary general meeting (EGM). Reportedly, allegations of ‘management failures’ led to this decision.

Raveendran and his family dispute the allegations, challenging the vote’s validity in court. The High Court temporarily halted the implementation of the resolutions passed in the EGM.

Legal and Financial Crises

Byju’s has been struggling with a growing number of legal and financial challenges. These include: investigations by India’s financial crimes agency, layoffs, delayed salaries, and a liquidity crisis.

Customers have reportedly accused the company of pressure selling, coercing parents into buying courses they couldn’t afford.

Missed Financial Deadlines

In January, Byju’s reported a consolidated loss of around 82 billion rupees ($1 billion) for 2022. The company is yet to present its audited accounts for 2023.

The company’s struggle to pay salaries due to a lack of funds has further exacerbated its woes.

Global Expansion and Acquisitions

Byju’s expanded globally, acquiring other edtech start-ups and firms. However, these ambitious moves came at a cost.

Initially focused on online tutoring for schoolchildren and competitive exam preparation in India, Byju’s later introduced learning apps in various Indian languages.

Rights Issue and Cash Crunch

The current standoff between Byju’s and its investors revolves around a rights issue. Byju’s proposed raising up to $200 million through this issue, inviting existing shareholders to purchase additional new shares in the company.

The pandemic darling became infected

Through the pandemic, as schools were forced to close, the business kept growing and expanding – until it all started to unravel.

It used to be India’s top private firm with a $22bn (£17.38bn) valuation, but now some see it as a warning for local start-ups, after investment firm BlackRock cut its worth to $1bn.

Byju’s, once a rising star, now faces a massive task and fight back to regain its former glory.

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