India’s most valuable startup BYJU’s is reportedly considering shutting down WhiteHatJr, a loss-making coding platform it acquired two years ago for $300 million, as the edtech firm is looking at ways to cut costs.
According to media reports, BYJU’s, which is valued at $22 billion, has held conversations in recent weeks about shutting down WhiteHatJr but a decision is yet to be made.
The company has denied plans to shut down the business.
“Regarding the specific question on White Hat Junior, we have no plans of shutting it down. We are merely optimising it for organic and efficient growth,” a BYJU’s spokesperson said, declining to elaborate further on plans related to WhiteHatJr.
“At the group level, in accordance with its steadfast commitment towards achieving operational profitability, BYJU’S is constantly evaluating and optimising its business operations towards global growth. As an ongoing activity, we are actively evaluating all our business units to ensure that they are aligned with our path to profitability,” the spokesperson said.
TechCrunch was the first to report on the development.
BYJU’s has been grappling with mounting losses and cost pressures with the waning demand for its offerings after the pandemic-induced boom period. WhiteHatJr, in particular, is said to have weighed on the company’s margins.
WhiteHatJr reported a massive Rs 1,690 crore loss in the financial year 2021, while its expenses reached Rs 2,175 crore in FY21 compared to Rs 69.7 crore in FY20. The entire group’s expenses surged 2.4 times to Rs7,027 crore, while its losses ballooned 14.9 times to Rs 4,564 crore in FY21.
Despite drastic cost-cutting measures including massive layoffs, BYJU’s has had to extend its timeline to become profitable at a group level to the fiscal year 2024, from its previous target of March 2023.
A founder at an edtech firm, who requested anonymity, told DealStreetAsia earlier this month: “I think they (BYJU’s) are under pressure due to a slowdown in their reviews growth. I think this is primarily due to poor reviews for their core offering and also bad acquisitions like Whitehat Jr. They have already done 2-3 rounds of firing in the last few months. I guess they might do more firing in the coming months… human resources are their biggest cost and optimisation opportunity.”
Despite being backed by marquee investors such as the Chan-Zuckerberg Initiative, Naspers, the Canada Pension Plan Investment Board (CPPIB), General Atlantic, Tencent, Sequoia Capital, Sofina, Verlinvest, IFC, Aarin Capital, Times Internet, Lightspeed Ventures, Tiger Global, and Owl Ventures, BYJU’s has drawn criticism for its marketing spend and acquisitions. In November, the firm roped in football star Lionel Messi as its brand ambassador, soon after firing 2,500 employees.
Last week, a source told DealStreetAsia that BYJU’s is in talks to raise $500 million at a flat valuation of $22 billion from investors including TPG. The fresh fundraising talks came as BYJU’s is in talks to negotiate the terms of a $1.2-billion loan, sources familiar with the matter told DealStreetAsia in December.