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Splurging on Messi Makes Messy Sense for A Bleeding Byju's

Onboarding a footballing legend like Lionel Messi while laying off people raises questions on whether the edtech brand is investing more in fanboy moments than running a profitable enterprise

Splurging on Messi Makes Messy Sense for A Bleeding Byju's
POSTED ON November 05, 2022 10:14 AM

"You are not just a name to me. You are not a number. You are not just five per cent of my company. You are five per cent of me."

These were the words Byju's founder and chief executive officer Byju Raveendran penned in an emotional mail to the 2,500 employees that the edtech laid off earlier this week in a bid to 'rationalise' business operations. 

He further sought their "forgiveness if this process is not as smooth as we had intended it to be", adding that he did not see this as a layoff but as time off.

This repentance would have acted as a salve on the wounds of the people rendered jobless. Except that today the decacorn announced it had signed footballing legend Lionel Messi as the global ambassador for its 'Education for All' program. 

Expecting backlash to this announcement, Divya Gokulnath, Byju's co-founder and Raveendran's spouse, told the Economic Times that this association falls "beyond the community, where there is impact." 

"In the last three hours, the amount of attention that 'Education for All' has received, it has not received that in the last 18 months," she added. 

Heartening as this sounds, does that mean that the edtech is missing the trees for the woods? 

Buy First, Think Later 

It is dichotomous for a company working hard towards achieving profitability at a group level to bring on board the highest-paid professional footballer globally as a brand ambassador. According to Forbes, Messi's earnings via endorsements as of FY 2022 stood at $55 million annually. Over the years, the footballing legend has been associated with many multinational brands, including Pepsi, Adidas, Budweiser, Mastercard and Gillette.

V Sivankutty, Keralas minister of General Education and Labour meets Byjus employees at his office
V Sivankutty, Kerala's Minister of General Education and Labour met Byju's employees at his office recently

The dystopian timing of Messi's appointment has raised several questions about how Byju's, India's most valued edtech at $22 billion valuation, is managing its finances. In September, the company released audited financial statements for the fiscal between April 2020 to March 2021 after a delay of more than 17 months. This unexplained delay saw Member of Parliament Karti Chidambaram writing to the Institute of Chartered Accountants of India (ICAI), urging it to investigate the edtech's delayed financial statements.

Incidentally, Byju's reported a loss of Rs 4,564 crore in FY 2021 fiscal as revenues dipped 3.3 per cent to Rs 2,428 crore. Raveendran defended the company's performance in a mail to employees, stating that it had clocked more than Rs 1,000 crore in sales in the last five months. 

He further wrote, "Going forward in FY23 and beyond, we will combine growth with efficiency to ensure sustainability. We have already started shifting our focus towards profitable growth. The overall idea is to allocate resources effectively in order to maximize impact."

According to Fintrackr, advertisement and promotion expenses comprised the highest expenses for the company in FY 21, accounting for 32 per cent of its overall expenses. While advertising and promotional expenses stood at Rs 899 crore and sponsorship expenses were another Rs 160 crore in FY20, it rose to Rs 1406 crore and Rs 128 crore in FY21.

Extravagant To A Fault 

Now, let's see how much Byju's spent on employee benefits. In FY20, this stood at Rs 420 crore, which shot up to Rs 1943 crore in FY21. This figure includes Rs 476 crore, which the company spent as ESOP expenses, primarily settled in equity. 

Byju Raveendran, chief executive officer, Byjus
Byju Raveendran, founder and chief executive officer of Byju's

However, one needs to bear in mind that since 2020, Byju's went into an overdrive acquiring edtech start-ups that were complementary to its business. According to some reports, it had shelled out around $2.2 billion in these mergers and acquisitions (M&As) in just 2021.

So, let's start the tally. 

It acquired Whitehat Jr in a $300 million all-cash deal in 2020. A year later, it snapped up start-ups left, right and center.

This included acquiring Aakash Educational Services for $1 billion, higher education platform Great Learning for $600 million, digital reading platform Epic! for $500 million and after-school learning app Toppr for around $150 million—all in a single year. Other smaller-ticket M&As in 2021 included its acquisition of Mumbai-based doubt-clearing platform Scholr for around Rs 18 crore as well as Bengaluru-based computer vision and AR start-up Whodat Tech, test preparation app GradeUp and online coaching platform HashUp for an undisclosed amount. 

Not content with M&As in India, it acquired companies abroad to fuel its expansion plans. In 2021, Byju's acquired California-headquartered coding platform Tynker for $200 million. 

People Before Personalities 

These acquisitions could explain why Byju's manpower strength swelled to a 50,000-strong workforce. This probably became a considerable revenue drain for the company, especially as revenues started dipping with people pivoting to offline education once again with the easing of pandemic restrictions.

In June 2022, 300 employees from Toppr and WhiteHat Jr, respectively, were handed pink slips

Raveendran did try to put a positive spin on this. He told his employees last month that the edtech was a billion-dollar-plus revenue company. 

"April-June 2022 was our best-ever quarter by far. In fact, we have clocked more than Rs 1,000 crore in sales in each of the last five months! This means $2 billion revenue is within our sights now," he claimed in an internal mail circulated to staffers. 

This came as little comfort to the people laid off by Byju's and its subsidiaries over the past several months. In June, 300 employees from Toppr and WhiteHat Jr, respectively, were handed pink slips.  

A Messi Affair

Byju's brand association with Messi could very well have been in the works for months. Nonetheless, the roping of the star footballer has raised eyebrows, especially with its decision to lay off its staffers. 

This month, the edtech planned to shut its operations in Thiruvananthapuram and let go of 140 employees. However, several staffers met the Kerala labour minister V Sivankutty, leading to Kerala Chief Minister Pinarayi Vijayan later stepping into the picture. Byju's then dropped its layoff plan; instead, Raveendran announced plans to hire 600 people in the state.  

Shah Rukh Khan
In 2017, Byju's roped in Bollywood actor Shah Rukh Khan as its brand ambassador

In light of these human resource management issues, the news of Messi coming on board has understandably painted the company into a corner. Questions are now being raised on how the edtech can scourge for funds to pay high-profile personalities when it cannot pay the very employees who keep its business going. 

While it is unclear how much Byju's has paid Messi, it has always liked to have eminent celebrities talk about its offerings. In 2017, it roped in Bollywood actor Shah Rukh Khan as its brand ambassador. Two years later, the company became the lead sponsor of the Indian cricket team, taking over the sponsorship contract from Oppo. 

In 2019, Byju's reportedly paid Rs 1.51 crore for every Indian Cricket Council (ICC) match so that the brand's name could appear on Team Blue's jersey. This year, the edtech agreed to continue as a sponsor until the 2023 ODI World Cup, even agreeing to a 10 per cent bump on the fees it was already paying.

Hobnobbing with the sporting events is not something Byju's continues to be alien to, poor revenues notwithstanding. Earlier this year, it became the official sponsor of the upcoming FIFA World Cup Qatar 2022. According to a start-up founder, who chose to remain anonymous, investing in such a global sports event indicates that the edtech is in the big league. This, in turn, will help it get more investments to tide over its current crisis. 

"It is one thing getting end users aware of the brand through these associations," he said. "However, what matters is showcasing your global prominence to investors. It gives credibility, which can be difficult to achieve otherwise." 

For way too long, it has appeared that Byju's has been grandstanding by getting into these alliances rather than investing in building a holistic educational portfolio. But the point is whether the edtech can afford this status quo, given the spate of layoffs it has recently announced. 

Surely, trading this goodwill for a few eyeballs is dangerous game play, especially when Raveendran is eyeing $2 billion in revenue. Keeping an eye on the ball is definitely preferable rather than playing to the gallery.

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