What Byju’s Bought Is Worth More Than What It Built

Byju’s is now India’s most valuable privately held internet company. And it's eyeing to more than double its valuation. Yet, just three of its subsidiaries contribute nearly all its fair value.

Investor interest surged in the provider of online education during the pandemic-triggered home learning boom. Its parent Think & Learn Pvt. sold shares ahead of its proposed initial public offering to new and existing investors at a valuation of about Rs 1,57,000 crore ($21 billion) as of December.

The edtech firm, looking to go public through a SPAC deal to raise about $4 billion, counts Mary Meeker, Yuri Milner, Chan-Zuckerberg Initiative, Tencent, Sequoia Capital, and Tiger Global among shareholders.

The company has been offered a valuation of $48 billion for SPAC listing but it is yet to take a final call, a senior executive at Think & Learn told BloombergQuint on the condition of anonymity as the person is not authorised to disclose details.

Prior to the last fundraise, the fair value of Byju's investments in all its companies were Rs 28,985.6 crore as of August 2021, according to a valuation report its parent Think & Learn filed with the Registrar of Companies. And its valuation based on discounted cash flow method stood at Rs 93,700 crore or nearly $12.7 billion.

But the company, co-founded by Byju Raveendran a decade ago, derives very little value from its original business, according to the valuation report. Most of it comes from acquisitions of education and technology companies since its inception.

And just three account for nearly 90% of its fair value.

Fair Value: The Biggest Contributors

In the last six years, Byju’s has acquired 11 companies, with Toppr Technologies Pvt. and Great Learning by Great Lakes E-learning Services Pvt. being its most recent purchases.

Nearly 67% of the company’s fair , however, comes from Tangible Play Inc., a Palo Alto-based educational gaming company that Byju’s acquired in 2019, according to filings.

Another valuable acquisition was WhiteHat Education Technology Pvt., the operator of WhiteHat Jr online coding-to-coaching classes. It contributes 15.4% to the total fair of the parent. And Aakash Educational Services Ltd., a competitive exam coaching provider, 29.48% owned by Think & Learn, accounts for 4.83%.

More Revenue Tech Teaching Aids

While Think & Learn's revenue rose in the fiscal ended March 2020, its loss widened as well, according to financials filed with the Registrar of Companies. The company has not disclosed FY21 numbers yet but is likely to report a loss because WhiteHat Education and Aakash Educational were unprofitable in pandemic-hit FY21.

Byju's, however, expects to hit a revenue of $1.5 billion (about Rs 10,000 crore) in FY22, driven by acquisitions in the last three years, the executive quoted earlier told BloombergQuint. Its valuation report guided for profitability at the group level in the ongoing fiscal.

While Byju’s earns tuition fees, its contribution to the top line is the lowest. 70% of its Rs 2,381 crore sales in FY20 came from teaching aids, products and tools it sells to aspirants of competitive examinations and also K-12, or kindergarten to standard 12, students.

How the revenue mix has changed since then is not known as the company has yet to file its FY21 numbers with the RoC.

Subsidiary Financials

Of all major subsidiaries, only Aakash Educational is expected to be profitable in FY22, according to the valuation report.

Tangible Play

It reported a Rs 342.8-crore revenue and a loss of Rs 204.9 crore in FY20, according to the group’s consolidated financials. The gaming and technology company reported a revenue of more than Rs 800 crore in FY21 and broke even operationally, the executive cited earlier said.

The company expects profit only by FY24.

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