12 highlights
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At its current valuation and with the whoâs who of investors on its cap table, Byjuâs is right at the top of the western worldâs understanding of Indian startups.
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One, that Byjuâs is primarily a company that sells tablets and SD cards to children in what is popularly referred to as the K-12 segment (from kindergarten to grade 12). At 70% of total income, this sale of hardware is at the heart of the companyâs operations.
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This SD card and learning outcome issue also neatly segues into our second point. The subject of how Byjuâs recognizes income. In our view, it is remarkable that Byjuâs continues to pull this off without investors throwing a fit.
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In simple words, Byjuâs is recording income that will be accrued over several years in just one year. Sources weâve spoken to say that a bulk of Byjuâs sales are three- to five-year plans.
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It is a remarkable position to continue playing. Because, on the one hand, Byjuâs says that it is in the edtech business, which has its grounding in learning outcomes and development of children spread over years. On the other, its financials say that once a customer gets the SD card, as far as Byjuâs is concerned the transaction has concluded.
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This becomes even more complex when you factor in that a majority of Byjuâs customers purchase the course by taking loans from financial institutions.
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The takeaway from this is that Byjuâs international revenue is a clear outlier in terms of performance. A large portion of it has come from the Middle East market.
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Two things are clear from Byjuâs earnings report. One, it is not an education company. Two, it desperately wants to become one because even Raveendran would know that bundling hardware can only get you so far.
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About 27 years ago, Shantanu Prakash, an IIM Ahmedabad graduate, thought it was a good business to sell computers to schools. Prakash moved fast and pioneered the âsmart classroomâ. Educomp went public. In just over a decade, Prakash scaled the business to over Rs 1,000 crore in revenue and reached 20,000 schools. He was riding a tiger. And then the business crashed.
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Byjuâs, it seems, is also riding a tiger, and thatâs why the company is on an acquisition spree. For the company to stay successful and relevant over the long term, it has to build education outcomesâwhich are sorely lacking currentlyâand the only way to do it is by acquiring companies with a proven track record.
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Raveendran said in the Business Today interview that âeach of our three new US products will churn out over $100 million of sales, making it a $350 million run rateâ. Again, that projection seems to be far from reality. In fact, it appears that Byjuâs core product is doing better in the international market than WhiteHat Jr, which Byjuâs acquired in August last year and which forms the backbone of the companyâs global business in the form of Byjuâs Future School.
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An average US consumer spends about $2,000 in a year, all inclusive. The market size is about 50 million students. So the total education market in the US is around $100 billion. At about 10%, supplemental education is about a $10 billion market.