India’s education tech giant struggles with math


Private-equity and venture-capital investors took a break this week in Baiju — the company is not yet listed. If it were, it would seem that the choppy markets would cause some serious swings.

The Indian education-technology company has finally released its audited financial statements for the fiscal year ending March 2021 after an 18-month delay. Losses ballooned but revenue was flat at $304.6 million — an unpleasant surprise given that Indian edtech companies saw high user growth in schools during the pandemic.

Baiju’s valuation rose to $22.6 billion as of July, data intelligence portal Tracxn reported. In the year In 2018, he became a so-called unicorn with a valuation of $1 billion.

The company, which is backed by the Chan Zuckerberg Initiative and Sequoia Capital, posted unencouraging numbers on changes sought by auditor Deloitte. Previously, Byjus recognized the full revenue value of online courses at contract inception. Deloitte pushed back, meaning the revenue is now retained as recurring payments throughout the contract. The auditor also requested other changes.

All of this has led to the postponement of nearly 40% of the revenue earmarked for 2021 to subsequent years. At the same time, the company acquired many loss-making companies, resulting in a large net loss.

Certainly, it’s not a good look for a company that was looking to list in New York earlier this year through a special purpose buyout firm. And it’s bound to raise more questions about the lofty valuations demanded by many Indian startups in recent years, especially as many have underperformed since their initial public offerings.

The real proof will be in the pudding baked this fiscal year: the company’s audited results for the 2022 fiscal year are due on September 30. Baiju Ravendran, the company’s founder and CEO, brushes aside this year’s poor performance as an accounting technicality and says his 71 investors aren’t worried: many of them are sitting on 50 to 100 times their paper profits.

“It’s easy for investors to sell at a discount and still make big money,” Mr. Ravendran said. The company expects fiscal 2022 revenue to increase significantly.

However Baiju’s saga eventually unfolds, such accounting explanations seem likely to herald the days of easy money in India – when investors buy first and ask questions later, sometimes to their chagrin.

Write to Megha Mandavia at megha.mandavia@wsj.com

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