Byju’s wants to buy an American startup—but does it have the funds?

Byju’s wants to buy an American startup—but does it have the funds?

Byju’s is set to splurge $1 billion on US-based ed-tech firm 2U but it may be in dire need of better bookkeeping back home.

For one, the Indian ed-tech major’s financial reports have been delayed for the past two years. There have also been reports of the company pushing back payments by two months for its $1 billion acquisition of brick-and-mortar coaching firm Aakash Educational Services. Byju’s had closed the cash and stock deal last April.

Besides, “to recalibrate our business priorities and accelerate our long-term growth,” Byju’s has been “optimising” its teams, the company said, admitting that it laid off “less than 500 employees” across group companies, including WhiteHat Jr. and Toppr. However, reports claim the layoff spree affected 1,500 staff between April and now.

Everything that Byju’s has tried to pass off as due process or strategic business moves could ultimately be deemed cost-cutting measures for a company nearing the end of its financial runway. “It looks that way when employees have been laid off to conserve cash,” said angel investor Vidhyashankar.

Byju’s did not respond to requests for comment.

Byju’s US expansion plans

Despite the turmoil in India, prioritising the US makes some sense given the massive business opportunity there. “It is a lucrative market, presumably with higher ARPU (average revenue per user)” than India, according to Vidhyashankar.

Last year, founder Byju Raveendran set a target of $1 billion in US revenue over three years. The firm is clearly focusing on acquisitions, a tried-and-tested strategy.

“In 2021 also, the company acquired two US-based companies, Epic and Tynker,” said Aurojyoti Bose, lead analyst at market research firm GlobalData. “It is worth noting that Byju’s also adopted a similar approach to strengthening its presence in India and undertook multiple strategic acquisitions in 2021.”

Startups in the US, meanwhile, need not be spooked yet. It’s “too early to comment on media reports on delay in payments to Aakash and assuming cash shortage to be a reason,” said Bose. Especially since both Byju’s and Aakash are denying the delay.

“The acquisition process of Aakash is fully on track and all payments are expected to be completed by the agreed-upon date, i.e, August 2022,” a Byju’s spokesperson told Quartz.

But if there is indeed a delay, “it sets a poor governance standard,” Vidhyashankar warned.

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