Byju’s has decided to rebrand its wholly-owned subsidiary WhiteHat Jr, while fully integrating the company’s assets into other business verticals including its holding entity Think & Learn Pvt, a move aimed at reducing costs to tide over an immediate liquidity crunch, Moneycontrol has learnt.
WhiteHat Jr, which Byju’s acquired for a whopping $300 million cash deal three years ago, has been one of the company’s biggest loss-making subsidiaries, thanks to its high marketing and employee benefit costs.
Byju’s infused over $100 million into the company since the acquisition for its expansion. A merger with self would thus help the company in reducing its overall burn, which will be critical considering its impending cash needs.
Sources told Moneycontrol that it is set to rebrand WhiteHat Jr as “Byju’s Future School” with an expanded offline presence. Byju’s Future School is a platform designed to teach coding to children outside of India and has enjoyed synergies with WhiteHat Jr since its inception three years ago.
When contacted, Byju’s declined to comment.
Byju’s made headlines in August 2020 with WhiteHat Jr acquisition, which provided founder and CEO Karan Bajaj with one of the most significant exits in the history of India’s startup ecosystem.
Byju’s will also factor in an impairment cost associated with WhiteHat Jr as it proceeds with the merger of the subsidiary in the current fiscal year, sources said.
An impairment charge is recorded to show a permanent decrease in the value of an asset of a company.
Byju’s has undertaken significant workforce adjustments at WhiteHat Jr since January 2023, with the majority of employees being laid off. The remaining staff members have been transitioned to the payrolls of Think & Learn Pvt Ltd, which runs Byju’s core K-12 business, according to sources who requested anonymity.
Think & Learn Pvt employees have been overseeing the operations of WhiteHat Jr, sources said.
“The tech team of Byju’s (core business) has been running the product for the past few months now. Some WhiteHat Jr employees were internally shifted to Byju’s but most of them were laid off,” said one of the people cited above.
“The senior management is still very optimistic about the product and so it will be rebranded with a bigger offline play,” the person added.
Data obtained from Employees Provident Fund Organisation (EPFO) shows that WhiteHat Jr Education Technologies Pvt Ltd, the entity that runs WhiteHat Jr, has not made provident fund (PF) payments since March 2023, suggesting that the company has no employees on its payroll.
In January WhiteHat Jr had 393 and in February 105 employees on its rolls, about a fraction of the 5,543 it had in January last. During peak 2021, WhiteHat Jr had over 8,000 employees, the EPFO data showed.
Think & Learn Pvt, also came under fire earlier this year for delayed PF payments but cleared it after the EPFO’s intervention.
WhiteHat Jr’s troubles
In 2020, WhiteHat Jr encountered significant criticism owing to its aggressive sales tactics. The company ran a campaign featuring a fictional 12-year-old character named Wolf Gupta. This campaign portrayed Wolf Gupta as securing a job worth Rs 1.2 crore at Google after mastering artificial intelligence (AI) through WhiteHat Jr’s programs.
WhiteHat Jr also faced allegations of disregarding the guidelines established by the Advertising Standards Council of India (ASCI).
Although WhiteHat Junior withdrew the Wolf Gupta campaign, it continued to allocate substantial resources towards customer acquisition. According to Byju’s FY21 results, WhiteHat Junior contributed Rs 326.66 crore to the total revenue but incurred a loss of Rs 1,548.76 crore before tax.
Byju Raveendran, Byju’s co-founder and CEO, admitted to WhiteHat Jr’s challenges in his media interactions several times. In an interview to Moneycontrol in January 2023, Raveendran said, “WhiteHat Junior has presented a challenge primarily on the cost side. Addressing its customer acquisition cost is our primary business hurdle.”
“Most of our core businesses are already at break-even or profitable. We are only experiencing a cash burn in the case of WhiteHat Junior.”
Earlier this year, a report by Tech Crunch also indicated that Byju’s had considered the possibility of shutting down WhiteHat Junior due to its high expenditure and struggles in finding a suitable product-market fit.
Earlier this month, Moneycontrol reported that WhiteHat Jr’s CEO Ananya Tripathi put in her papers after going on a maternity break in May. Apart from Tripathi, Byju’s has seen a slew of senior-level exits in the past two months.
Byju’s woes
Besides merging WhiteHat Jr, Byju’s is also undertaking a strategic review of its other subsidiaries and assets, as it looks to conserve cash amid lender commitments. The company will be letting go close to 5,000 more employees who are on the payroll of Think & Learn Pvt, Moneycontrol reported earlier this week.
Earlier this month, Byju’s sent a proposal to its lenders to repay its entire disputed $1.2 billion term loan B within the next six months, with an upfront payment of $300 million in the next three months.
The company is planning to sell two key assets–Great Learning and US-based Epic to fund its repayment plans.
Separately, it has also been looking to raise a fresh equity funding round. Byju’s, one of the world’s largest edtech firms, last valued at about $22 billion, has been looking to raise funds since the start of the year. However, the company has not managed to close the round amid ongoing challenges on various domestic and international fronts.
In May, it raised $250 million in structured instruments from Davidson Kempner but the US-based AMC held back close to $150 million as the company’s talks with its lenders did not progress well.
Byju’s also had a technical default on the Davidson Kempner loan. This prompted Raveendran to raise funds to repay to avoid losing control of his most valuable asset, Aakash Educational Services. Byju’s had offered Aakash’s shares as collateral for the Davidson Kempner loan.
Byju’s is also exploring fundraising from one of its earliest backers, Ranjan Pai, for Aakash Educational Services. Pai is expected to buy out a part of Raveendran’s stake in Aakash, Moneycontrol reported last month. Raveendran holds close to 30 percent stake in Aakash.