'If you look at assets truly working for us, you should look at Aakash and Great Learning.'
Edtech company Byju's, whose losses widened to Rs 8,245.2 crore (Rs 82.45 billion) in 2021-2022 (FY22) from Rs 4,564.38 crore (Rs 45.64 billion) in 2020-2021 as subsidiaries WhiteHat Jr and Osmo underperformed, is expected to see consistent improvement and the losses considerably shrinking in 2022-2023 (FY23) and 2023-2024 (FY24), says Nitin Golani, India chief financial officer, Byju's.
In a video interview with Peerzada Abrar/Business Standard, Golani says the company has taken several measures to improve the company's operating financial conditions, including scaling down underperforming businesses significantly.
Why was there such a long delay in filing the financials, and what are the challenges?
Earlier, we had Deloitte Haskins & Sells as the statutory auditors for Think & Learn (Byju's parent).
The audit came out after a significant delay. In July-August 2023, we appointed MSKA & Associates, the audit arm of accounting major BDO Global, as our auditor.
This was a first-year audit for them. In that period, we did our final board meeting and closed on the audit.
When the audit started, it was completed on time in about three-and-a-half months.
We have already filed the FY22 financials with the ministry of corporate affairs. Now my priority is to get the FY23 audit to a close.
Despite revenue jumping to Rs 5,014.60 crore (Rs 50.14 billion) in FY22, the losses almost doubled to Rs 8,245.2 crore. How do you see these numbers?
There was 2.2x growth in overall total income in FY22 (Rs 5,298.43 crore/Rs 52.98 billion) versus 2020-2021, or FY21 (Rs 2,428.39 crore/Rs 24.28 billion).
Yes, there have been losses, but I would like to draw your attention to the earnings before interest, tax, depreciation, and amortisation (Ebitda) of the company, which was (minus) Rs 4,142.97 crore (Rs 41.42 billion) in FY21 and (minus) Rs 6,679.11 crore (Rs 66.79 billion) in FY22.
However, our Ebitda percentage improved from 171 per cent to 126 per cent.
Byju's made several acquisitions, including WhiteHat Jr and Osmo. What kind of impact did they have on the company?
Underperforming assets were primarily WhiteHat Jr and Osmo (Tangible Play), which amount to 45 per cent of the losses (about Rs 3,800 crore/Rs 38 billion).
Excluding WhiteHat Jr and Osmo, there was 3x growth in total income in FY22 versus FY21, and Ebitda percentage improved from 163 per cent to 78 per cent.
We acquired 11 firms in the past two years. Of course, not every asset is going to perform well.
If you look at assets truly working for us, you should look at Aakash and Great Learning.
When we acquired Aakash, it was a Rs 1,065 crore (Rs 10.65 billion) revenue firm in FY21.
In FY22, in the first year of acquisition, under Byju's umbrella and with the support of the leadership, it grew by 40 per cent (Rs 1,491 crore/Rs 14.91 billion).
In FY23, it has grown beyond 40 per cent. In FY23, you will see that this company has improved.
Another such company is Great Learning, which was acquired in FY21, and had a revenue of Rs 354 crore (Rs 3.54 billion), and this grew 77 per cent to Rs 628 crore (Rs 6.28 billion) in FY22.
There is also core Think & Learn (Byju's parent), which grew by 120 per cent.
The auditor's report has indicated that a material uncertainty exists, including the litigation related to the $1.2 billion Term Loan B (TLB) that may cast significant doubt on the company's ability to continue as a going concern.
If you look at the auditor's opinion and who has complete access to our books and the actuals of FY23 and FY24 until January, then they can see that the company has undertaken many measures to narrow down the company's losses.
However, they have also obtained the legal opinion to be of the view that this liability of TLB will not come in the foreseeable future.
Of course, if that litigation results in an unfavourable outcome for the company, it will have to pay $1.2 billion.
The company reported total expenses of Rs 13,668.44 crore (Rs 136.68 billion) in FY22, an increase of 94 per cent compared to Rs 7,027.47 crore (Rs 70.27 billion) in FY21.
What are the reasons for such an increase in expenses, and what is the plan to control cash burn?
Of the Rs 8,245.2 crore losses, almost Rs 4,000 crore (Rs 40 billion) has come from WhiteHat Jr and Osmo.
For these two businesses, we are significantly optimising the marketing spending.
In FY23, these businesses may again be a drag on the entire group.
I am not spending a single rupee on marketing related to these businesses and am trying to bring in synergies and efficiencies.
BlackRock recently reduced the valuation of its share in Byju's -- this time to about $1 billion. This is 95 per cent less than its peak valuation of $22 billion in 2022.
Other investors have also made similar markdowns. How worried are you as CFO of the company?
We are sharing all of our data with shareholders and telling them what are the expected FY23 and FY24 numbers.
Certainly, these (markdowns) concern me, but the way I look at it is that markups can also happen quickly.
Is securing fresh capital a challenge for the company amid macroeconomic uncertainty, and what is your strategy for raising capital?
If we put an attractive valuation on the table, which we believe is significantly lower than the true value of the company, it is going to be very easy to raise money at this stage where the firm is right now.
That supports the founders' mindset where he's looking at a possible rights issue from existing investors.
There has been a string of senior-level exits at the firm over the past few months, including CFO Ajay Goel who quit in November 2023 and general counsel Roshan Thomas.
Are you concerned about talent moving away?
It is not in the best interest of the company to lose leaders.
As we demonstrate strong corporate governance by making sure that we have an independent board, the business is showing improvements and there are green shoots towards profitability, I'm very confident that talent will come back.
Feature Presentation: Aslam Hunani/Rediff.com