Every generation of investors gets one company that teaches the whole market what to check. For Indian venture capital, Byju's is that company. The story has been told many times; this is the checklist I take from it.
What happened, briefly
| When | What |
|---|---|
| Before the pandemic | Valued at about $5 billion |
| 2021 | Raised a $1.2 billion US term loan |
| 2022 | Peak valuation of about $22 billion |
| October 2023 onward | Senior departures, including the CFO; later board advisers |
| 2024 | Rights issue at a valuation of about $225 million, a discount of about 99% |
| July 2024 | NCLT admits insolvency proceedings over unpaid dues of about ₹159 crore to the BCCI |
| October 2024 | The Supreme Court reinstates the insolvency process after a settlement was challenged |
The term loan was the turning point. Lenders accused the company of breaching its covenants, delaying financial disclosures and moving about $533 million of the proceeds beyond their reach. Prosus later wrote off its 9.6% stake.
A temporary force mistaken for a permanent one
The Absorb half of my Push and Absorb framework starts by classifying a change: did it arrive fast or slowly, and will it pass or is it permanent? The pandemic surge in online learning arrived fast. The mistake available to any company in that position is to treat a spike as the new normal and rebuild the business around it, with acquisitions, hiring and debt sized to demand that might not last. The framework's advice for a fast force that will pass is to cushion it and not rebuild the firm around it.
The signals I would check in any fast grower
- Audited accounts filed late. A company that cannot close its books on time usually has a reason.
- Senior finance and board departures, especially in a cluster.
- Debt raised to fund growth, with covenants the business can breach if growth slows.
- Acquisitions large enough to change the shape of the company every year.
- Revenue recognised in ways that differ from cash collected.
- Control concentrated so that no one on the board can say no.
None of these proves wrongdoing on its own. Together they are the pattern, and BluSmart, which I cover in the unit economics of an electric cab fleet, showed a version of it in mobility: borrowed money, related-party structures and an alleged diversion of loans that ended a working service.
What it means for operators
The lesson is also for the people running companies. Growth that depends on debt or on a temporary surge needs a written plan for when the surge ends. And the dull disciplines, closing the books on time and reporting bad news early, are what keep a company financeable when things go wrong. I describe the reporting side of that in the one-page monthly update.
