Meet The Man Byju Raveendran Whose Company Byjus Was Once A 22 Billion Company Is Now Worth Zero After Inventiva Investigation & Complaint To SFIO

Byju Raveendran’s journey as an entrepreneur is one filled with soaring highs and dramatic lows, tracing the evolution of a company that was once India’s crown jewel in the edtech sector. Born on January 5, 1980, in the village of Azhikode in Kerala, Byju Raveendran did not initially set out to revolutionize education. After completing his B.Tech from the Government College of Engineering, Kannur, he began working as a service engineer for a multinational shipping company. However, his true passion lay in teaching, and this passion eventually drew him toward the world of test preparation.

From Engineer to Educator: Founding Byju’s Classes

In 2007, Byju founded Byju’s Classes, a test preparation business initially focused on helping students crack competitive exams such as the Common Admission Test (CAT). What set Byju apart was his unique teaching style, which involved simplifying complex concepts and presenting them in an engaging, relatable manner. His approach soon garnered a large following, with his sessions growing to stadium-sized audiences. Byju’s Classes quickly became a household name in India’s test preparation landscape, helping thousands of students achieve their academic goals.

The Birth of Byju’s: A Digital Revolution in Education

In 2011, Byju, along with his wife Divya Gokulnath—whom he met when she was a student in one of his exam preparation classes—co-founded Byju’s. This marked a significant shift from traditional in-person coaching to a digital model that sought to make high-quality education accessible to millions of students across the country. Byju’s, the learning app, revolutionized the education sector by offering personalized and interactive video lessons that catered to each student’s unique learning style and pace.

Byju’s initial focus was on school students from grades 4 to 12, with content designed to make subjects like mathematics and science easier to understand. The app’s adaptive learning model, which provided feedback and tailored lessons to the individual student’s strengths and weaknesses, was a major success. The rise of affordable smartphones and increased internet penetration across India further fueled the app’s popularity.

Byju’s Meteoric Rise to the Top

Byju’s trajectory of success was unprecedented. By 2020, the company had become India’s most valuable startup, with a valuation of $22 billion. During the COVID-19 pandemic, as schools across the globe shut down, Byju’s became a go-to platform for millions of students, further accelerating its growth. Forbes estimated that Byju Raveendran, his wife Divya, and his brother Riju Raveendran had a combined net worth of $3.4 billion by 2020, marking them as some of the wealthiest individuals in India.

The company’s rapid rise was also fueled by a series of strategic acquisitions aimed at bolstering its portfolio and expanding into new markets. In 2021, Byju’s acquired Aakash Educational Services Ltd., a leading Indian test-prep provider, for nearly $1 billion. This acquisition helped Byju’s establish a foothold in offline education, complementing its digital offerings.

Byju was also named to India’s National Startup Advisory Council in 2021, further solidifying his standing as a key player in the Indian startup ecosystem. However, despite these major milestones, trouble was brewing beneath the surface.

Overexpansion and Financial Troubles

Byju’s aggressive growth strategy, which included the acquisition of over two dozen startups to expand into new markets, ultimately proved to be a double-edged sword. The company’s plan to go public in early 2022, with investment bankers valuing the firm as high as $50 billion, was derailed by global economic factors, including the Russia-Ukraine war. As venture capital markets plunged, many of Byju’s key investors became hesitant, leading to a liquidity crunch.

The company’s financial troubles began to deepen as several major investors, including Prosus Ventures, Peak XV, and the Chan Zuckerberg Initiative, left its board citing governance issues. Auditor Deloitte also resigned, raising concerns about the company’s financial disclosures. With these key departures, Byju’s struggled to raise additional funds, and the situation became increasingly precarious.

In July 2022, Byju Raveendran invested $400 million of his own money in a desperate attempt to keep the company afloat. However, these efforts were not enough to stem the tide of financial losses, and Byju’s soon entered insolvency proceedings.

Speaking Out: Byju’s Admission of Mistakes

In a candid conversation with journalists, Byju Raveendran admitted that the company had made several strategic missteps. He acknowledged that Byju’s had overestimated its growth potential and mistimed the market, resulting in an overly aggressive expansion strategy that ultimately backfired. Byju’s, which had once been valued at $22 billion, was now essentially worth “zero,” according to Raveendran.

Byju’s financial woes were compounded by a series of legal challenges, including allegations of fraud related to the misuse of a $1.2 billion loan. U.S. lenders accused Byju’s of transferring $533 million to offshore entities linked to Raveendran, raising suspicions of fraudulent activity. Although Raveendran denied any wrongdoing, the dispute continued to play out in court, adding to the company’s mounting troubles.

Inventiva’s Investigative Report and SFIO’s Probe into Byju’s

In the midst of Byju’s financial and legal troubles, Inventiva, a prominent Indian business magazine, published a groundbreaking article on June 10, 2023, which uncovered several alleged irregularities in Byju’s accounting and taxation practices. The article detailed potential discrepancies in the company’s financial disclosures and raised concerns about its governance.

The crux of Inventiva’s investigation centered around Byju’s parent company, Think & Learn Private Limited (TLPL), and its alleged evasion of Goods and Services Tax (GST) to the tune of ₹43 crore. The investigation revealed that TLPL had engaged in questionable practices related to the sale of educational materials such as books, tablets, and SD cards. These products were reportedly sold to students, but TLPL allegedly failed to disclose certain critical information to the tax authorities, resulting in tax evasion.

Inventiva’s investigation did not stop there. The magazine also uncovered issues related to Byju’s service tax payments for its commercial training and coaching services. According to the report, TLPL had allegedly failed to pay the appropriate taxes for the services it provided, amounting to ₹18.81 crore in unpaid taxes. These revelations painted a troubling picture of a company that had not only faced financial mismanagement but also appeared to be skirting its tax obligations.

Following the publication of Inventiva’s article, the magazine demanded immediate action from India’s Serious Fraud Investigation Office (SFIO). Within 20 days of the article’s release, the SFIO initiated a full-fledged investigation into Byju’s, marking the beginning of a legal and regulatory battle that would further complicate the company’s already fragile situation.

The Impact of the SFIO Investigation

The SFIO’s investigation into Byju’s added a new layer of complexity to the company’s ongoing struggles. The probe was centered on allegations of financial mismanagement and tax evasion, both of which could have serious legal consequences for the company and its leadership.

The investigation uncovered several more issues, including irregularities in the procurement and distribution of tablets and SD cards. According to the GST department’s findings, TLPL had purchased blank SD cards, recorded educational content on them, and then sold these modified SD cards to students as part of its educational offerings. However, TLPL allegedly failed to account for the transformation of these goods in its tax filings, leading to a tax liability of ₹24.53 crore.

The SFIO also looked into TLPL’s handling of tablets, which were sold to students with preloaded educational content. The investigators alleged that TLPL had evaded taxes to the tune of ₹5.6 crore through its sale of tablets between 2015 and 2017.

The growing list of legal and regulatory challenges further eroded investor confidence in Byju’s. What had once been hailed as India’s edtech success story was now embroiled in allegations of fraud, tax evasion, and financial mismanagement.

Employee and Stakeholder Reactions

As the legal and financial troubles surrounding Byju’s mounted, the impact on the company’s employees became increasingly apparent. Many teachers and staff members had gone months without receiving their salaries, leading to widespread frustration and desperation. Byju’s workforce, which had once been its greatest asset, now found itself at the center of a financial storm.

Approximately 3,000 employees filed claims for unpaid wages, with many struggling to make ends meet. Teachers who had previously conducted online classes for students were now refusing to work, citing the futility of continuing without pay. The financial strain had a profound impact on the lives of these employees, many of whom were dealing with mounting medical bills and personal debts.

The uncertainty surrounding Byju’s future also created tension among parents and students who had enrolled in the company’s programs. Byju’s inability to provide services due to its financial troubles led to growing dissatisfaction, with some parents even considering reaching out to Byju’s former brand ambassador, Lionel Messi, to raise awareness about the company’s issues.

Governance and Accountability

In addition to its financial and legal troubles, Byju’s faced significant scrutiny over its governance practices. The company’s failure to provide timely financial statements for the 2021-22 fiscal year raised concerns about transparency and accountability. These concerns were compounded by the resignation of Deloitte as the company’s auditor, further damaging Byju’s reputation.

The resignation of key board members, including representatives from Prosus Ventures and Peak XV, also signaled a lack of confidence in the company’s leadership. Investors accused Byju Raveendran of mismanagement and a lack of transparency in decision-making, although Raveendran denied these accusations.

As the SFIO’s investigation continued, the focus on Byju’s governance failures became even more pronounced. The investigation revealed a pattern of financial irregularities, including the use of complex financial structures to obscure the company’s true financial health. These revelations further fueled calls for greater accountability from Byju’s leadership.

Byju’s Future: A Long Road to Recovery

Despite the mounting challenges, Byju Raveendran remains hopeful that his company can stage a comeback. In internal communications with employees, he has assured them that their salaries will be paid as soon as the company regains control of its operations. Raveendran has also expressed confidence that Byju’s is on the verge of reversing its negative business cycle, pointing to signs of recovery in the company’s core operations.

However, the road to recovery is long and uncertain. With its reputation tarnished, investor confidence shattered, and legal challenges mounting, Byju’s faces an uphill battle to regain its former status as a leader in the edtech space.

Conclusion: From Triumph to Turmoil

Byju Raveendran’s journey from a small village in Kerala to the helm of India’s most valuable startup is nothing short of extraordinary. His innovative approach to education transformed the lives of millions of students, making Byju’s a household name in India and beyond. However, the company’s meteoric rise has been matched by an equally dramatic fall, as financial mismanagement, legal troubles, and governance failures have brought Byju’s to the brink of collapse.

The investigation initiated by the SFIO, following the explosive article by Inventiva, has cast a spotlight on the serious issues facing the company. What began as an edtech success story has now become a cautionary tale of the perils of overexpansion, aggressive growth strategies, and a lack of transparency in governance.

As Byju’s battles to survive, the world watches to see if the company can rise from the ashes and reclaim its position in the global edtech landscape. For Byju Raveendran, the journey ahead will be fraught with challenges, but if his past resilience is any indication, the possibility of a comeback cannot be entirely ruled out.