In today’s Finshots, we talk about why BYJU’s parent company is finding bidders despite being under insolvency proceedings and mostly defunct.

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Now, on to today’s story.

The Story

Over three years ago, Think & Learn Private Ltd, the parent company of BYJU’s was the crown jewel of India’s edtech ecosystem. At one point, it was the most valuable startup in India, valued at about $22 billion. Everyone had heard of or seen BYJU’s. Even India’s cricket team had ‘BYJUs’ splashed across its jerseys.

Confident in its dominance, the company went about on an acquisition spree, snapping up firms like Whitehat Jr, Great Learning, Aakash etc, one after the other. This was BYJU’s broader goal of expanding aggressively in the K-12 learning sector, and with these acquisitions, they’d also enter test prep and upskilling services. BYJU’s even planned on expanding its business to North America, which is one of the reasons why it secured a massive $1.2 billion term loan in November 2021.

This rapid expansion wasn’t by accident. You see, after the pandemic, BYJU’s saw the opportunity for growth in the learning industry. From K-12, it wanted to become an educational super-app where you would learn from your school level to advanced test prep like NEET, JEE and even IAS exams and no company was offering everything under one umbrella. So the logic was to scale fast and dominate early.

But that loan came with strings attached — audited financials, credit ratings, disclosures and more. It wasn’t free money and it was also much more than the initial ask of $700 million. As time passed, the missteps of the company began piling up. For starters, the audited statements arrived with an 18 month delay and after the ministry of corporate affairs had to write to BYJUs. Its auditor raised concerns about how BYJU’s recognised its revenues.

When the FY21 filings would arrive, it showed a massive loss of about ₹4,588 crores.  This was the moment when that ‘hypergrowth’ locked horns with the reality of operations.

The delayed filing would lead to lenders asking BYJU’s to repay the loan immediately, because to them, BYJU’s had breached the agreement of the loan. What followed was a battle between lenders and BYJU’s, auditing concerns, corporate governance issues and all the while customers (parents of BYJU’s students) started complaining about the aggressive selling practices like mis-selling that plagued the company. 

Even employees' salaries weren’t paid, and at the start of this year, the parent company TLPL was pushed into the Corporate Insolvency Resolution Process (CIRP). Translation: BYJU’s is effectively defunct.

On paper, it looked like another ed-tech startup that burned too quickly after the pandemic. As schools reopened, demand for online learning plummeted and that looked like the last chapter.

But something unexpected happened. The insolvency should have scared off any buyers from investing or taking over the firm. The reputational damage, not to mention the long list of issues with the company, would be enough to send any investor running the other way.

Instead, the insolvency announcement brought in an expression of interest (EOI) from two major players in the edtech sector: Ronnie Screwwala of UpGrad and Manipal Education and Medical (MEMG) Group’s Ranjan Pai, which already own a stake in Aakash Educational Services.

Sidenote: An Expression of Interest (EOI) is an official document that shows interest of a company or person to take part in a professional opportunity, which in this case, was the takeover of TLPL Ltd.

Now their EOIs genuinely raised some questions, with the most important being: Why would serious players in the edtech space, who have enough reason to stay away from TLPL, want to acquire the bankrupt edtech company?

On the surface, the brand had taken a beating and its finances were wrecked. But for UpGrad and MEMG, this takeover wasn’t about rescuing BYJU’s: it was about the two assets beneath the wreck that kept their shine: Aakash Educational Services and Great Learning. The paradox was written on the wall: While TLPL drowns, its assets are still bringing in investors.

Think of a failing company’s assets like mangoes at a fruit market. On day 1, when the mangoes are fresh and perfectly ripe, they command a premium price. Everybody wants them, and sellers can charge a premium. If you want the best, you pay the best.

But give that same stall a couple of days. The mangoes don't look as fresh as they used to, the skin wrinkles and fruit softens. The seller needs to sell it all before it spoils and they know they can’t charge the same price as day 1. Now, suddenly you as the buyer have all the bargaining power. And here’s the key: Even though they look a little bruised on the outside, many of the mangoes inside are still perfectly good — sweet, usable, and worth buying.

That’s what happens in insolvency.

On the outside, the company looks like it’s going bad, be it the brand, the finances or the debt. But on the inside, some assets like Great Learning and Aakash still look like high quality high value assets. This collapse simply allows investors to buy these assets at a discounted price so in reality, they’re not buying a bad batch of mangoes, they’re just picking the good ones inside on a clearance sale price.

For the Manipal Group, it was more about buying up stake in Aakash Educational Services, where it is already a majority stakeholder. They became the largest shareholder in 2024 and if this bid turns out to be successful, they’d get to own the profitable offline institute at a fairer value. So far, the group has submitted two EOIs for TLPL, and for a while, it was the sole bidder until UpGrad entered the picture.

You see, for UpGrad, the value lies in the K-12 learning segment, along with Aakash and Great Learning. A few weeks ago, they were in talks to takeover Unacademy, another test-prep platform for a valuation of $300 million, a tenth of its peak valuation of $3 billion in 2021. Adding BYJU’s assets would strengthen their position in India’s learning industry, with little to no competition.

Whatever vision BYJU’s had, the competition seems to be taking forward. And that’s where the value in these acquisitions lie: Not in the BYJU’s brand, but the pieces that are still worth saving today. 

Yet the road ahead isn’t as easy as it looks. Because insolvency proceedings take time, and behind them are thousands of investors and stakeholders waiting for their dues. 

So let’s circle back to the mangoes for a moment. When you agree to buy the slightly old batch from the seller, you’re also agreeing to take the parts that are bruised, shrivelled, or unusable. That’s part of the bargain. Sellers rarely agree to hand over only the best pieces — because from their perspective, the entire lot needs to be sold, and the leftovers have no value to them.

At the insolvency court, GLAS Trust Company is representing BYJU’s term loan B lenders, and their claim is the single largest of them all, tied to the $1.2 billion loan issued back in November 2021. The founders have contested this voting share, but GLAS Trust remains as the biggest voice of the insolvency proceedings. In insolvency, the biggest claim usually gets the loudest voice, which means that GLAS has veto power over the Committee of Creditors (CoC) - the panel of lenders who decide the fate of the company.

So even if UpGrad and the Manipal Group want the crown jewels, the final say doesn't lie with them - it’s with the CoC. Because in an insolvency process, the CoC doesn’t see offers based on the bidder, it’s based on which proposal recovers the most money for creditors. Here that’s not just the investors, it’s lenders and employees who haven’t seen salaries for a while.

So for now, all eyes are on the insolvency proceedings. Aakash and Great Learning may survive; TLPL may not. And only time will tell who walks away with what’s left.

Until then…

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