 "Edtech company Byju's goes ahead with cutbacks, fires 500 staffers")
Cash-strapped Byju’s is laying off about 500 employees, or over 3 per cent of its total 15,000-strong workforce, as part of a restructuring exercise. The struggling educational technology (edtech) giant faces a severe funding crunch, battles investors and lenders, and has experienced a markdown in its valuation, according to sources.
The new round of layoffs has mainly impacted sales, marketing, and teaching roles at the company.
The latest round of layoffs is part of the restructuring exercise started by the Bengaluru-based edtech last year to let go of about 4,500 employees. It is being undertaken by Arjun Mohan, who was elevated as chief executive officer of its India business last year, replacing Mrinal Mohit. About 3,000 people were let go between October and November last year.
However, in the latest layoff round, the company’s human resources (HR) department executives terminated the employment of staff over a phone call, followed by an email. They initiated the exit process immediately and informed them that their last working day was that very day, according to people familiar with the development.
“Employees got a call from HR executive and were told that ‘today is your last working day’, followed by an email,” said a person. “Employees are complaining that the HR executives didn’t behave well.”
According to sources, besides initiating layoffs on phone calls, Byju’s let go of employees without putting them on a performance improvement plan or having them serve a notice period. When employees asked the reason for the layoff, HR executives attributed it to the poor financial condition of the company.
“There is tremendous stress among employees. Byju’s has decided to hold off its staff salaries for the second month in a row,” said a person. “The company is facing attrition, and many employees are looking out for new jobs, but the job market is difficult, and they are finding it challenging to get jobs that match the salaries of Byju’s.”
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The firm confirmed the layoffs but didn’t reveal any numbers.
“We are in the final stages of a business restructuring exercise announced in October 2023 to simplify operating structures, reduce cost base, and better cash flow management,” said a spokesperson for Byju’s.
“We are going through an extraordinary situation in the company because of the ongoing litigation with four foreign investors, where every employee and the ecosystem are going through tremendous stress, given the present circumstances.”
The spokesperson added, “We regret the unfortunate situation the company has been forced into. Still, it is something that we will put behind us soon with the majority of investor support for the $200 million rights issue. We request everyone’s understanding of the individual and collective stress on the system, which might be prompting some unforeseen situations for the departing employees.”
Byju’s has given up all its regional sales offices across India, keeping only its headquarters at IBC Knowledge Park in Bengaluru. The offices that have been given up could be well over 20 across Delhi, Gurugram, Mumbai, Pune, Hyderabad, Chennai, and more.
While the restructuring of office space started a few months ago under Chief Executive Officer Arjun Mohan, a final decision was taken recently to shut all regional sales offices to save costs in the midst of a severe funding crunch and valuation markdown, according to sources.
With that, the company has told all its employees — 15,000 of them — to work from home indefinitely. The staff working at about 300 Byju’s tuition centres across the country would, however, continue going to office.
At its peak in 2022, Byju’s had about 50,000 employees, which included the edtech firm’s various subsidiaries.
According to sources, the financial situation at Byju’s might improve once it gets the $200 million raised through the rights issue.
Byju’s is also grappling with another setback as it faces delays in paying salaries to employees. The delay stems from funds raised through a recent rights issue, which have been locked in a ‘separate account’ due to the ongoing dispute with investors.
The company management, including Byju Raveendran, has assured employees that, regardless of the court verdict, they are following a parallel line of credit to ensure employees receive their March salary by April 8. The employees were expected to get their salaries on Monday.
Byju’s and its investors are fighting at the National Company Law Tribunal (NCLT) over the company’s rights issue of $200 million in a petition alleging oppression and mismanagement.
The four investors — Prosus, General Atlantic, Sofina, and Peak XV Partners (formerly Sequoia India & Southeast Asia) — had sought a stay on the rights issue at less than 99 per cent enterprise valuation compared to Byju’s peak valuation of $22 billion.
The NCLT, in its order on February 27, has instructed the edtech firm to place funds obtained from the rights issue in an escrow account. However, these funds cannot be withdrawn until the resolution of the matter related to the rights issue, according to sources. This action is part of the oppression and mismanagement petition filed against Byju’s by four of the company’s investors.
Byju’s said it has faith in the Indian judicial system and eagerly awaits a favourable outcome that will enable it to utilise the funds raised through the rights issue and alleviate the financial challenges that it is currently facing.
The company’s revenue jumped to Rs 5,014.60 crore in 2021-22 (FY22). However, the losses widened to Rs 8,245.2 crore in FY22 from Rs 4,564.38 crore in 2020–21 as subsidiaries WhiteHat Jr and Osmo underperformed.
However, the firm is expected to see consistent improvement and the losses considerably shrink in 2022-23 and 2023-24, said Nitin Golani, India chief financial officer, in an interview recently.
Golani said that the company has taken various measures to improve the company’s operating financial conditions, including scaling down the underperforming businesses significantly.
PINK SLIP
· The latest round of layoffs is part of the restructuring exercise initiated by the company last year, letting go of about 4,500 employees
· Around 3,000 employees were let go between October and November last year