Coaching Lesson

FIRST THERE WAS Educomp. In 2010-12, I made a handsome monthly stipend from short selling its share, as the pyramid of the ‘smartschool’ company succumbed to gravity. The company took on more debt than it could handle, and was forced to sell off its assets as revenues failed to keep up with expenses.

A decade later, Byju’s is tracing the same arc, from rising star to crashing meteor. The unlisted company’s valuation has plummeted from 22 billion dollars to 3 billion dollars, in barely eighteen months. The two stories parallel each other in the eerie march of history.

Educomp’s, Pradip Saha recounts in The Learning Trap, “was a case of exponential growth and the inability to manage it, leading to creative accounting, and fudging of books…most of the current playbook of hard-selling and mis-selling, financial engineering were invented then.”

Raveendran Byju used the recipe to launch his business into a different orbit; whereas Educomp’s valuation peaked below `10,000 crore, Byju’s hit over `180,000 cr. But they were both fuelled by frothy financial markets—stock markets for Educomp, and venture capital for Byju’s. When start-ups became unicorns, valued at a billion dollars, they attracted more eager investors, enabling ever increasing sums in creating hype.

Raveendran Byju was already an educational rockstar, filling stadiums with learners, before he parlayed his aura into a business that could raise billions of dollars on reputation alone; as is clear now, the global venture capitalists who pumped in money, and pumped up valuations, had not paid too much attention to the numbers underlying the business. Businesses actually, as Byju’s used investor funds to buy up other educational companies like a child in a candy store.

The two most celebrated acquisitions were WhiteHat Jr—itself a miracle of perception over reality—and Aakash, which was the polar opposite, a solid brick-and-mortar company preparing young people for medical entrance exams, and built up over decades. While WhiteHat Jr is now a mere shadow, Aakash is no longer under Byju’s effective control, with a member of the founding family in the CEO’s seat.

Raveendran liked to describe himself as an educator turned businessman. You could almost hear the missing word, ‘reluctant’. But there was no reluctance to be the poster-boy of edtech, and in Pradip Saha’s telling, the reality behind the hype was always elusive. A journalist with the digital news site, The Morning Context, Saha writes, “Every time I write about Byju’s, Raveendran and I end up talking at great length. Most times, these conversations are rhetorical and lead nowhere. And yes, he always asks what I personally, or The Morning Context as an organisation, have against him.”

When narrative is key, first to your success, then to your very existence, any questioning of that narrative is seen as a threat. Raveendran’s response to questions ranged from confusion and mild irritation to “what sounded like veiled intimidation.”

For the last couple of years, Byju’s tried to keep the balloon aloft, with news shots of large incoming investors, and by delaying the annual tryst with financial reality, in the form of audited results. The fat was already in the fire when this book was released, but it’s gotten worse since. The Enforcement Directorate has served notice on Byju’s for foreign exchange violations to the tune of `9,000 crore, and on December 24, 2023, Mint reported the intriguing story of half a billion dollars that went AWOL.

A US subsidiary of Byju’s borrowed 1.2 billion dollars, and invested 533 million of it in a hedge fund. When unpaid creditors went in search of those funds, they had been moved out of the hedge fund. This financial fluency is the stuff of a web series, but in time, I think there is a more important book to be written here, a psychographic profile of what makes an educator into a businessman, and then into a financial illusionist.

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