Crucial test for Byju’s: Can the edtech major sustain its big-ticket sports sponsorships?
Yes, says Atit Mehta, Byju’s Marketing Head, who insists that all sports sponsorship deals will be honoured, and the call on their renewal will be taken when the time comes
Edtech major Byju’s recent disclosure about a whopping Rs 4,500 crore losses in FY 21 has initiated a fresh round of debate over valuation of startups and their flamboyant ways of sponsoring big-ticket properties.
Questions are also being raised as to whether India’s most valued startup will be able to sustain its flashy sports sponsorship deals inked over the past couple of years.
The Bengaluru-based company, in March this year, was declared the official sponsor of FIFA Football World Cup 2022 to be held in Qatar. The deal is supposed to be worth $40 million. Byju’s is India cricket team's jersey sponsor as well. It replaced OPPO in 2019 and extended the deal until the end of 2023, after its original term expired in March 2022. The extension is estimated to be valued at around US$ 55 million. The company has also partnered with ICC and the deal is believed to be closer to US $13 million.
The three big-ticket properties are worth US$108 million (Rs 800 crore), approximately ⅓ of Byju's revenue reported for FY21 (Rs 2,400 crore).
Apart from international men’s and women's cricket, the startup is the official media partner of Star Sports in the Indian Premier League (IPL).
Byju’s spent about Rs 2,200 crore in advertising and marketing in FY22, making it one of India’s top advertisers.
While the edtech’s co-founder Divya Gokulnath has claimed, “Our losses in FY21 have been cut to half in FY22 and we have clocked Rs 1,000 crore+ in revenue every month this year,” the business fraternity, especially media and advertising sector, doesn’t seem to be impressed much.
Veteran adman and MD of Rediffusion Dr Sandeep Goyal opines that Byju’s may have to cut down on its hefty sponsorship deals going forward. “The cows have finally come home. These fanciful projects will all eventually have to be truncated,” Dr Goyal quips.
Sports deals to continue, call on renewal to be taken closer to time: Atit Mehta
Atit Mehta, Byju’s Marketing Head, insists that all sports sponsorship deals, both national and international, inked by the company so far will be honoured. He says the call on renewal of the deals will be taken when the time comes.
Speaking to e4m on the matter, Mehta explains, “Our deal with FIFA is for this particular world cup that will be held in Qatar this year. We are proud to be the first Indian brand to be associated with FIFA. Next football world cup will be held after four years in the US, Mexico and Canada. Things will be quite different by then. We will take a call on our further association with FIFA close to that time.”
Mehta added, “As far as the BCCI association is concerned, we have already renewed our deal and that will continue till 2023. The ICC deal will end in November 2023, after the 50-over cricket world cup. So, cricket sponsorship is covered, FIFA is just one world cup deal. We have a lot of time to take a call on renewing these deals.”
When asked whether the company would take a relook at its advertising spend in future and rationalize it or would continue to advertise aggressively as ever, Mehta says the AdEx is decided based on the current marketing needs.
“Marketing expenditure depends on a lot of things. When a new product is launched, the budget requirement is higher. For expansion of the company and targeting new consumer segments, budgetary needs are different. Our media spend in the next 9-12 months will be optimized based on the marketing needs.”
Mehta underscores that the ad budget is a derivative, not the starting point. “The objective of the marketing team was different in the past, currently it is different and it might be completely new. What would be required higher or lower, that would be done. We are here to build the brand and provide access to quality learning to everyone. We have continued this journey for six-seven years. Have no doubt why we can’t do it in future,” Mehta adds.
‘vivo and PayTm walked out before’
Experts, however, point out that some top brands have pulled out of large sports properties in the past.
“Vivo had backed out of the IPL sometime back. PayTm has ended its deal with BCCI recently. Other players entered the game,” says Rahul Vengalil, Executive Director at Everest.
Vengalil says, “Byju’s is under pressure and the PR around it is all negative. Just read a piece which called Byjus the most expensive edutech startup in the world. They will be forced to relook at their investment. Where they will cut costs depends on their growth engine. In case the growth projection is happening outside of India, then they may retain international properties like FIFA and let go of the Indian properties or vice versa.”
Shradha Agarwal, Co-Founder and CEO of Grapes, says, “In order to expand the business, Byju’s forayed into multiple things such as offline classes, acquisitions and ventured into collaborations and expensive partnerships with sporting leagues in ways that affected their profitability. Looking at the situation, I think it is the need of the hour that major efforts are focused on retaining the stakeholders and ensuring continuity in their operations.”
Agarwal suggests that Byju’s should retract from unnecessary financial expenditure in the form of expensive marketing spends and also curbs sponsorships to fill the loss.
‘No imminent threat’
Some experts however feel that there is no imminent threat to Byju’s sponsorship deals.
Lloyd Mathias, Business Strategist and Angel Investor, says, “Many startups in the growth phase do spend large sums well ahead of the curve to increase their share and grow their customer base. In this quest for growth, they tend to bet on big marketing properties that enable mass awareness and instant uptake. Investing in mega events like the IPL or ICC/BCCI events or evening signing superstars is part of this.”
Mathias points out that Byju’s have made big commitments with cricket – their logo on the Indians cricket team jerseys for Rs 5 crore per bilateral match and Rs 1.65 crore per match in an ICC event. Besides, their commitment as global partners for the 2023 ICC ODI World Cup in India and their partnership with FIFA for the football World Cup in Qatar make them one of the big spenders.
“However, they are set to raise yet another $500 million (Rs 3,400 crore) from UAE-based funds at a whopping valuation of $23 billion, media reports say. So, there is no imminent threat to them backing out of these commitments. But going forward their performance will be closely watched by investors,” he added.
Mathias feels that edtech is still a significant category with huge potential because online learning took off during the course of the pandemic and has now become commonplace. As the largest player in the space, Byju’s does have a big presence and have actively diversified into offline education, with their acquisition of other players.
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