On September 14, India’s most-valued startup, Byju’s, posted a surprise decline in revenue, albeit marginally, for FY21, a year that saw the internet sector mushrooming across the world, thanks to stay-at-home Covid-19 restrictions.
The edtech sector in particular emerged as one of the biggest beneficiaries of the Covid-19 pandemic, thanks to surging demand for online education services. Since the pandemic started in March 2020, as many as six edtech startups have turned unicorns as investors poured billions of dollars into the edtech sector, to enable these edtech companies make the most of the pickup in demand for edtech solutions.
In a year like this, for the world’s most-valued edtech company to post a decline in revenues was unusual and would perhaps lead to a tighter scrutiny of companies’ projections by investors going forward, market watchers said. Byju’s also posted what was the biggest loss for an Indian startup - Rs 4,558 crore.
To be sure, Byju’s has raised over $3 billion since the start of the pandemic in equity and over $1.2 billion debt, with its valuation soaring manifold to more than $22 billion. The company said it clocked gross revenue of Rs 10,000 crore for FY22 and is on track to surpass that in FY23. But as the company makes big projections, let’s first do a deep dive into its revenue and expenditures for FY21.
How does Byju’s earn money?
Byju’s said that after readjusting its revenue owing to changes in accounting practices, it deferred about 40 percent of its revenue for subsequent years, and so the company reported a marginal decline in its revenue for the year.
Byju’s profit and loss statement for FY21 showed that the edtech giant earned about Rs 2,280.26 crore from its operations. That accounts for most of its total revenue of Rs 2,428.39 crore. This year, Byju’s changed the way it described its revenue from operations. The company’s FY20 filings had showed that it had generated most of its revenue from the sale of tablets and SD cards. Byju’s had received a lot of flak for it.
This year, the company thus changed it to ‘sale of edutech products’. Byju’s got Rs 1,848.74 crore from sale of edutech products that comprises tech embedded devices, tablets, SD cards and laptops. However, it was mentioned in the notes attached to the financial results and was not mentioned upfront. Sale of edutech products still accounts for the most of Byju’s revenue.
Apart from sale of edutech products, Byju’s earned Rs 320.61 crore from course fees and Rs 108.47 crore from streaming services. The three heads -sale of edutech products, course fees and streaming services - made up for the most of Byju’s revenue.
Other than revenue from operations, Byju’s earned about Rs 93.83 crore as profit on sale of current investments, and about Rs 47 crore as interest income on financial assets carried at amortised cost on bank deposits, the company’s financial report showed.
Byju's had operations in three geographies as of FY21. The company's India revenue dropped significantly to Rs 987 crore in FY21, an indication of the company struggling in the domestic market, especially in a year like FY21 that boosted demand for edtech services in India.
The company had clocked revenue of Rs 1,603.65 crore in FY20. To be sure, both the numbers were readjusted in accordance with the new revenue recognition methodology.
Byju's US revenue, however, doubled to Rs 795.59 crore in FY21 from Rs 341.17 crore in FY20. The company's Middle East revenue, too, doubled to Rs 497 crore in FY21 from Rs 244 crore in FY20.
The significant drop in India revenue and doubling of overseas revenue suggests that the company lost ground to newer and smaller domestic players like Tiger Global-backed Vedantu and Ronnie Screwvala-backed Lido Learning among others during the year, as these companies saw their revenues surging manifold. It also underlines Raveendran's move to shift his focus to global operations, with Byju's COO (chief operating officer) Mrinal Mohit moving to a larger role to head India operations.
How does Byju’s spend?
Byju’s expenditures swelled nearly 2.5 times in FY21 from FY20 to over Rs 7,027.47 crore. The company’s expenses in FY20 were Rs 2,873.34 crore. Major heads under Byju’s total expenses were advertising and promotional expenses, purchase of edutech products, teachers’ fees and employee benefit costs.
In an interview with Moneycontrol on September 14, Raveendran explained how the company’s expenses remained the same even as it had to defer its revenue for subsequent years owing to a change in its revenue recognition method.
Byju’s spent 2.5 times on advertising and marketing over FY20. The company spent Rs 2,250.94 crore on promotional activities in FY21 against Rs 899.34 crore in FY20. The company did not give any notes on it. To be sure, these expenses were for FY21, when the company had not renewed its contract with the BCCI (Indian Cricket Team) or had not even signed as FIFA World Cup’s title sponsor.
Byju’s employee benefit expenses, meanwhile, swelled nearly five times during FY21 to Rs 1,943.30 crore from Rs 420.26 crore in FY20. Employee benefits include provident fund, employee state insurance scheme, gratuity fund, compensated absences.
In FY21, Byju’s spent nearly Rs 300 crore as teacher’s fees. The company had none in FY20 and it also didn’t provide any note for it. The company also spent Rs 774.64 crore on purchase of edutech products, which comprise tablets, laptops and SD cards against Rs 457.7 crore in FY20.
Besides the above-mentioned spends, Byju’s’ ‘other expenses’ amounted to Rs 1,503.03 crore in FY21, up from Rs 853.73 in FY20. Legal and professional fees accounted for the largest chunk of ‘other expenses.’ Byju’s spent Rs 672.94 crore on legal and professional fees, that include payment to the auditor, which was up over 4x from the previous financial year. Other than that, commissions paid on sales accounted for Rs 237 crore for FY21, up from Rs 115.01 crore in FY20.
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