Edtech companies: Government expresses concern over complaints against edtech companies

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The government has taken seriously allegations of mis-selling of courses by education technology companies.

Complaints against Byju and group entities were highlighted in a discussion because the edtech leader caters to a broad student base, people briefed on the matter said.

The Consumer Affairs Department raised concerns about this and various other aspects during a meeting with education technology companies and its self-regulatory organization India Edtech Consortium (IEC) on June 24, said to ET sources knowledgeable about it.

Senior department officials also raised concerns in a follow-up call the same day to executives at Byju’s – India’s most-valued startup – saying most of the complaints they had received were related to the Bengaluru-based startup and its group units, the sources said. The company’s co-founder, Divya Gokulnath, wife of founder Byju Raveendran, also attended the call, they added.

Following this, Gokulnath and senior staff shared a detailed action plan with officials to address complaints, another person with knowledge of the matter said.

Department officials, the sources added, pointed out at the meeting that they had received 147 consumer complaints against edtech startups. It is expected to share the full list of complaints with the IT companies soon, they said. “Aggressive overselling to parents is something that has been discussed, among other issues, as well as some claims made in advertisements. Byju’s has been advised to work closely with the Advertising Standards Council of India (ASCI),” one of the people said.

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Industry self-regulatory body ASCI said last month that of the 5,532 advertisements it handled in the previous financial year, 33% of complaints came from the education sector, which includes the education sector. edtech as well as traditional educational institutions.

“They (the Byju) are now engaging closely with ASCI,” the person added.

A spokesperson for Byju said on Friday that the IEC proactively convened the meeting to update the consumer affairs ministry on its recent moves toward greater transparency and accountability.

“Byju’s was never singled out during the meeting with the IEC,” the spokesperson said in a statement, adding that the IEC had also discussed working with ASCI.

“In terms of the ASCI complaint data, of the 5,532 complaints filed with them, 33% were from the education sector. Of the 33%, 6% were from the edtech sector. 2% of the total complaints filed with ASCI concerned the edtech sector,” the statement added.

Gokulnath is a key member of the IEC, which was established earlier this year under the Internet and Mobile Association of India. Byju’s and group companies, as well as Unacademy and Upgrad, are among its members.

“They (IEC) have had meetings with officials from the Ministry of Education, but the meeting with the Consumer Affairs Department shows that they are aware of the consumer complaints that are being raised by parents, students and parents. professionals and that they also need to raise them with businesses within their jurisdiction,” an industry executive involved in the talks said.

Separately, IEC has received at least two complaints against Byju’s and its coding unit WhiteHat Jr, people familiar with the matter said.

ET could not independently verify the nature of the complaints or whether they had already been fully addressed.

“You can file a complaint against any edtech company with the council and they enforce their self-regulatory codes through a committee and the same is shared with affected companies for corrections. The idea of ​​the IEC is that self-regulation must be practiced in the spirit, otherwise it may lead to stricter polity by the government,” one of the sources said.

The government has been suspicious of the growing number of complaints against edtech startups, which also involve the mis-selling of loans or financing options for various courses offered by these platforms, the person added.

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“The issue is also significant because Byju’s has become a household name and any action against the company is also not good news for other companies in the sector,” said another industry executive.

ET reported on June 30 that Byju is considering renaming WhiteHat Jr, which has reportedly come under scrutiny for some misleading ads.

Byju recently laid off at least 600 employees from group companies WhiteHat Jr and Toppr.

Byju’s, valued at $22 billion, has yet to close its latest $800 million funding round and its audited financial results have yet to be filed with the Registrar of Companies (RoC).

Raveendran, according to the company, recently completed investing $400 million, arranged via debt financing from financial institutions, into the company as part of the $800 million round.

On July 4, Byju’s announced that it would announce its latest audited financial statements within the next 10 days. Of the $800 million funding announced in March, it hopes to receive $250 million by August.

Raveendran is also looking to complete a potential acquisition of US edtech player 2 U for which it is reportedly preparing a $2.4 billion bid with funding from JP Morgan.

Last November, Byju’s closed a $1.2 billion term loan.

“I don’t see a lack of demand for any type of capital for Byju despite strong headwinds there… It’s also a good time for companies to differentiate themselves,” Raveendran told ET in May.

Over the past 12 to 18 months, Byju’s has spent around $2.5 billion on multiple acquisitions in India and overseas. Its acquisition of the Aakash Institute fitness center for nearly $1 billion was its biggest deal to date.

ET reported on July 4 that Byju’s cleared the necessary payments for the deal after an initial delay.

“Debt is one of the most effective ways to raise capital if you have a proven track record of raising or financing your clients. They are partners who have been with us for three or four years,” Raveendran said during the interview in May.

There was a 37% drop in venture capital funding for startups in India in the June quarter compared to the March quarter, ET reported on July 4.

ET previously reported that Unacademy co-founder Gaurav Munjal told his team they needed to drastically cut costs and turn cash flow positive while his senior management, including the founders, took a pay cut. and closed verticals that did not find a product. market fit.

In February, Byju’s said it planned to invest $200 million to develop tuition centers in 200 cities. Rivals Unacademy and Vedantu are also growing offline.

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