Has BYJU’s big marketing spends contributed to its current crisis?

The National Company Law Tribunal (NCLT) has recently accepted a plea submitted by four investors against the Indian edtech firm BYJU's. According to media reports the investors have alleged the company's leadership of oppression and mismanagement. This is the fifth legal action initiated with the NCLT against the financially troubled company.

BYJU's is currently facing a financial crisis, and in a recent development, the company's shareholders voted unanimously to remove the startup's cofounder Byju Raveendran from his post as CEO at an extraordinary general meeting.

BYJU's reached its pinnacle in March 2022 with a valuation of $22 billion, fueled by the surge in demand for online education during the Covid-19 pandemic. However, from being India’s most valued edtech startup, the company's valuation has now dwindled to a range of $1 billion to $3 billion. While several factors have contributed to this downfall, media reports blame its lavish marketing spends to be a significant factor.

According to an Inc42 report, BYJU's total expenditure stood at Rs 26,100 crore over the FY16-FY22 time period. Its biggest expenditure was its advertising costs. During the period, the startup’s total advertising cost stood at Rs 8,029 crore. This is almost 69% of its operating revenue during the period, which stood at Rs 11,792 crore during the same period.

In FY22 the startup spent Rs 4,134.94 crore for advertising expenses during the year, a 84% jump from Rs 2,250.94 crore spent in FY21. 

According to a LiveMint report Whitehat Jr, which Byju’s acquired for about $300 million in 2020, cost the company nearly Rs 220 crore every month towards marketing expenses. Yet, the subsidiary reported a pre-tax loss of Rs 2,877 crore for FY22, bigger than its loss of Rs 1,549 crore in the year before.

An Inc42 report from 2022 highlights that BYJU’S consolidated marketing expenses for FY21 (Rs 2,250.94 crore) were nearly three times more than the combined marketing expenses of three edtech unicorns- Unacademy, Vedantu, and upGrad, which stood at Rs 793.5 Cr in FY21. 

BYJU’S is known to have adopted an unrestricted and aggressive approach towards its marketing spends.

It roped in brand ambassadors like Bollywood actor Shah Rukh Khan and football star Lionel Messi. In 2017, Khan came on board for an annual fee of nearly Rs 4 crore. The deal was not renewed after it came to an end in 2023 as part of its cost-cutting measures. 

It roped in Messi as the global ambassador of its social impact arm for three years during the 2022 FIFA World Cup. According to media reports, the soccer star had come on board for an estimated $5-7 million per year.  But barely a year after the deal was signed, it was put on hold.

It was also associated with the International Cricket Council (ICC), the Board for Control of Cricket in India (BCCI) and the Federation Internationale de Football Association (FIFA). It became ICC’s global partner for three years in 2021. According to a TOI report, the deal was valued in the range of Rs 120-130 crore. It also became the official sponsor of the FIFA World Cup in 2022, becoming the first Indian company to sponsor the global football event. Media reports suggest that it paid $30-$40 million for the FIFA deal.

Byju's replaced Oppo to become the jersey sponsor of the Indian team from 2019 till March 2022. According to a report in Economic Times, the edtech company was paying Rs 4.6 crore for each bilateral match held in India, and Rs 1.56 crore for each international match organised by the International Cricket Council (ICC) and the Asian Cricket Council (ACC). 

Its original deal term with the BCCI expired in March 2022 and in June, it extended its deal until 2023-end for $55 million. In 2023, as the company began curbing its expenses it announced its decision to not renew these partnerships. In November 2023, BYJU’s faced a new legal crisis as BCCI dragged the company to the NCLT for non-payment of Rs 160 crore sponsorship money.