Nitin Golani is a busy man. Since he assumed the role of Byju’s chief financial officer (CFO) for its India operations around October last year, he has been meeting with the company’s shareholders every week.
“There are 80 shareholders on the cap table. They are divided into three groups of around 25 each and then I get on a call with each of the three groups,” he said.
He talks to the investors about opportunities and challenges facing the company. He takes feedback.
It’s a firefighting job at the once feted edtech, which had the distinction of being India’s most valuable startup.
In a stormy annual general meeting of the company last month, shareholders grilled the management for three long hours. The agenda for the meeting was approval of the company’s FY22 accounts.
About 22 months after the reporting period, Byju’s finally shared its audited FY22 statements with the Ministry of Corporate Affairs (MCA) on January 23.
Its losses ballooned from Rs 4,564 crore in FY21 to Rs 8,245 crore in FY22, while revenue rose 118 percent to Rs 5,298 crore.
Golani said the biggest culprits of this performance were two acquisitions — WhiteHat Junior and Osmo — which have not fared well.
“Now, I am starving them of cash,” he said.
Meanwhile, he is trying to fast-track the audit of FY23 numbers. And then start the process for FY24 audit as Byju’s seeks to raise fresh funds via a rights issue.
Moneycontrol had a wide-ranging conversation with Golani about the future of Byju’s, the company’s controversial revenue recognition practices, its business model of arranging for customer loans, the edtech’s relationship with subsidiary Aakash, and more.
Edited excerpts:
Why did you have such a large loss?
The first thing is these are March 2022 numbers that you are seeing and we are now in January 2024. The company has significantly moved forward from these March 2022 numbers.
In the Rs 8,000 crore loss of Byju’s, you will see that WhiteHat Junior has contributed about Rs 3,000 crore and Osmo about Rs 1,000 crore. These are two acquisitions that have not panned out well for us. Excluding them, the loss of the entire business is around Rs 4,500 crore. Now, I am not trying to say by any stretch of imagination that Rs 4,000 crore loss is a good number.
Also read: Byju’s in 'directional agreement' with BCCI to settle dues over next 6 to 8 months
Where does Byju’s go from here?
The immediate mandate that I have is to close FY23 audit as soon as possible. You will see a significant improvement in FY23 over FY22 and in FY24 over FY23. I am not saying the company will become profitable. All I'm saying is that at least it will be moving in the right direction and continue to improve on profitability.
Sitting in January 2024, I can tell you that we have starved the Osmo and WhiteHat Jr businesses of cash. Their marketing costs have been reduced to zero and the teams have been right-sized. As these businesses are not giving me significant revenues, I have stopped funding these businesses completely.
Why don’t you sell off Osmo and WhiteHat Jr?
It is a buyer’s market today and not a seller’s market. Whoever wants to buy today is sitting there to squeeze you and generate maximum value. Because of the funding winter and prevailing macro-economic conditions, it is not a seller’s market. Even if I want to sell off Osmo and WhiteHat Jr, no one will buy.
Mera best alternative tha ki jo bik sakta hain usko becho, jo nahin bik sakta usko fund karna band kar do (My best alternative was to sell what can be sold, stop funding what can’t be sold). Even if their revenue goes down, it does not impact the group as a whole.
Are you going for a rights issue? What valuation are you seeking?
I'm sure you're aware of the fact that the company has a liquidity crunch and we certainly need money to be raised. We have a lot of investors who have invested in our company at like $12 billion valuation, $15 billion valuation, $18 billion valuation and even $22 billion valuation. If we were to give them a very lucrative price to be able to invest in the company, I'm sure they will come forward to invest.
Can you give us some top level guidance for FY23 and FY24 numbers?
I would like to refrain from doing that because once bitten, twice shy. When my predecessor was here, we had committed some guidance and audit timelines. Unfortunately, you know, we fell flat on that. Since I stepped into the role, I speak to 80 of my shareholders on the cap table every week. I tell them what are the highest value opportunities for the company, what are the biggest challenges that the company is facing so that they are completely in the loop. My biggest strength in this company are my customers, my employees and my shareholders.
I've got the who's who of the PE-VC world on the cap table. If I am able to continue to get their support, I'm very confident that we will be able to get this company back on track.
But most of your board members have quit. Is there any effort to constitute a new board?
My immediate mandate by the shareholders to me is to get the FY23 audit done and FY24 audit on the track which means that the company truly is in green, as far as compliances are concerned. That's when we get the board back, a truly independent marquee board, and maybe some strong leadership on the table as well to continue building back this company.
Byju’s has taken money from Aakash. In effect, is Aakash being starved of its own cash flow?
Let’s see this objectively. These are our companies. One is generating cash that it does not require and another is burning cash. Should I raise money from outside or use the cash that is lying around? Ultimately, Aakash is our company that we bought for Rs 7,000 crore. Take the example of Tata Group where cash is taken from multiple entities and then infused in other businesses where cash may be needed. That is a very regular thing in companies.
It’s like taking money from one pocket and keeping it in another. How does it matter? Why is it such a big deal? I paid Rs 7,000 crore to acquire that company.
But, maybe the reservation is that Aakash could need that money to grow. You are not allowing it to grow using its own cash.
It’s my company. I will decide where to grow, where there is the maximum value for money. It’s an operating decision. Nobody is talking about the Rs 300 crore we infused in Aakash. It did not have any ads for 33 years. In the last couple of years, there were lots of ads that Byju’s paid for.
When Byju's filed its FY21 result, there was an auditor’s opinion regarding incorrect revenue recognition. Has that issue been resolved?
As a practice of good corporate governance in the company, we want to be extremely conservative on our revenue recognition policy. Deloitte took a stand. And BDO has gone with the same stand, and in certain cases, even taken a more aggressive stand to defer revenue and not recognise it in the current year. We have made sure that whenever we provide services, we recognise revenue only in that period.
There was an issue of Byju’s guaranteeing loans taken by its customers to buy its products. How much of your sales are through that route?
About 25-30 percent of our business came from loans. However, no NBFC is giving such loans to our customers anymore because of our audit delays. As a consequence, these are things of the past.
When did that happen?
To the best of my knowledge, this had started happening in early 2023, or FY24.
Did you take a hit on your revenue because of that?
Yes, that happened in FY24 because collections have not happened. Let me explain. In the earlier scenario, the loan partner would pay us at one go after cutting the first loss default guarantee. And then the customer would pay the lender in equated monthly installments. So, we did not have a receivable balance on our books. In the new scenario, we have to collect the fees from customers every month and so there are receivables on our books.
What portion of them typically turn to non-performing assets?
It's not a significant percentage. This is typically certified by an independent third party. I got Grant Thornton to give me an expected credit loss (ECL) report. It's not that significant.
Your financials show that you have further payment obligations to complete acquisitions. How much money would you require for those obligations?
That is only true for Great Learning and Tynker. Also, a lot of it is performance-based such as if you hit this target, you will get so much… Assuming that we sell out Great Learning, there will be enough money to meet those obligations as well. It is a wide range depending on if the performance targets are met or not over the next three years. It could be anywhere between $20 million and $100 million.
Filings reveal that over Rs 2,900 crore of loans are ‘prejudicial to the company’s interest’ and have not been paid back. What’s the issue?
We have infused fresh funds into our acquisitions — be it GradeUp, Osmo, Aakaash, Toppr or others — in the form of debt. These are inter-company loans. All these acquisitions were structured as mergers. As the mergers happen, the liabilities would be knocked off immediately.
What is the future of WhiteHat Junior?
The future of it is that it will be significantly truncated as a business which is what you will see in FY23 and FY24 numbers. Today we are not profitable on that asset, but I'm inching towards breakeven as a group.
My mandate is that one business unit’s loss gets canceled out by another unit’s cash flow — and we break even at a consolidated level. As a consequence, I am truncating WhiteHat Junior. I am starving it for cash. I don't want to invest in any marketing activities there. I want to reduce the cost of any extra people there as well.
You are also trying to sell Epic. Will you be able to sell it for at least the amount you bought it for i.e. around $500 million?
Don’t look at it that way. When we bought it, there was a cash component and an equity swap. The equity swap had happened at a valuation range of $16-18 billion which is a distant dream today.
Byju’s employees frequently say they didn’t get salaries or provident fund money. Is there any effort to remedy that situation?
I don’t run two elements — taxes and PF. Somebody else is looking at those things. My singular focus now is FY23 audit.
How is your domestic business doing vis-à-vis international? In FY22, 69 percent of the revenue was from India.
In FY23, it will be 80 percent domestic. Osmo has been significantly truncated. The focus of Epic is to sell it. Great Learning has a Singapore focus and is very small in India. So, you could perhaps see a large chunk i.e. 80-85 percent of revenues coming from the domestic business.
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