Byju’s Crises, The Pan Gets Hotter For Byju’s With The US Court, NCLT Giving No Respite, Exodus Of Critical Players And Impending Legal Battle With Employees In Distress; Is There A Future For Byju’s?
Byju’s crises keep getting deeper with each passing day. Whether the edtech firm will be able to ride the huge wave of distress and turn the tide around for the company seems unlikely.
So, what has happened in the last few days?
Here is a complete list of all the significant events that have hit Byju’s in the last couple of days, as well as some more.
The Mounting Legal Battles
US bankruptcy court imposes penalty on Byju’s director, says testimony ‘not truthful’
According to reports, a US judge has imposed financial penalties on Riju Ravindran, brother of Byju’s founder Byju Raveendran, following Ravindran’s failure to disclose the location of $533 million sought by lenders.
The judge concluded that Ravindran’s testimony was “not truthful” and suggested that he either knows where the money is hidden and refuses to reveal it or has not attempted to find out.
Ravindran, his brother, and sister-in-law are directors of the Indian technology company Think & Learn Pvt Ltd, which is entangled in a dispute with lenders over a debt exceeding $1.2 billion.
US Bankruptcy Judge John Dorsey stated on Tuesday in Wilmington, Delaware, that the exact amount of the financial penalties will be determined in a future hearing.
The report further states that during the hearing, Judge Dorsey tried to ascertain the location of the funds but could not get Ravindran to disclose it. “I conclude Mr. Ravindran’s testimony is not truthful,” Dorsey remarked.
Earlier, Dorsey had ordered the arrest of a hedge fund manager who assisted Ravindran in moving the cash and who defied a court order to reveal the money’s whereabouts.
Dorsey declined to issue an arrest warrant for Ravindran, who resides in Dubai and does not have an extradition treaty with the US.
These latest developments follow lenders’ previous seizure of a holding company established by Think & Learn to issue $1.2 billion in debt.
The seized entity, Byju’s Alpha, is currently under bankruptcy proceedings overseen by Dorsey.
However, Ravindran is appealing a decision by Delaware’s Chancery Court that approved the seizure.
Battle With NCLT
NCLT Issues Notices To Byju’s For Non-Payment of Dues To Creditors
Byju’s parent company, Think and Learn Pvt Ltd, is also encountering financial difficulties and is being sued by multiple creditors.
On May 22, the National Company Law Tribunal (NCLT) issued notices to Think and Learn in three cases related to the non-payment of dues to operational creditors.
Publisher McGraw Hill, BPO service provider Cogent, and supplier of automation control products AG Automation brought the three cases.
Byju’s owes McGraw Hill Rs 1.43 crore and Cogent approximately Rs 6 crore. The NCLT has given Byju’s two weeks to respond and the creditors one week to file a rejoinder.
The hearings for these cases are scheduled for July 3.
Byju’s Faces Legal Action from Current and Former Employees Over Unpaid Dues
According to recent reports, around 400 employees from Byju’s, including those who were laid off, resigned, or are still with the company, have decided to sue the company for not settling their dues.
The report states that a 24-year-old former employee initiated the idea of bringing together current and former employees facing non-payment issues. This employee, who chose to remain anonymous, created a WhatsApp group that quickly gained popularity.
The former employee then created a Google form where individuals could provide a brief description of their issues, the amount owed to them, and their employment status at Byju’s.
Within a few days, over 400 people completed the form, and the total amount owed to both current and former employees was Rs 5.17 crore. However, this may not represent the full extent of the outstanding payments.
Point to note – Byju’s is already entangled in NCLT cases with seven of its stakeholders.
One such case involves a group of investors who filed an “oppression and mismanagement plea” against the company. The Bengaluru bench of the NCLT has postponed the hearing to June 6.
Several companies, including Oppo, BCCI, and Teleperformance, have also filed insolvency pleas against Byju’s.
Byju’s has also delayed part of its employee salaries for up to two months since March due to a shortage of funds.
In May, while the company managed to pay April salaries to all “active” employees, it laid off several staff members just days before, according to multiple sources.
Rajnish Kumar, Mohandas Pai Exit from Edtech Major Byju’s Advisory Council
Think & Learn Private Limited (TLPL) and advisory board members Rajnish Kumar and Mohandas Pai have mutually decided not to renew their contractual agreement, which is set to end on June 30, 2024.
“Our engagement with the company as advisors was always on a fixed-term basis for a year. Based on our discussions with the founders, it was mutually decided that the tenure of the advisory council should not be extended. Though the formal engagement concludes, the founders and the company can always approach us for any advice. We wish the founders and the company the very best for the future,” Kumar and Pai said in a joint statement.
In June 2023, Byju’s auditor Deloitte Haskins & Sells resigned from its role due to the company delaying the filing of financial results. Following the auditor’s resignation, representatives of the firm’s top three investors — Prosus, Peak XV Partners, and the Chan Zuckerberg Initiative — also resigned.
Revealing the reasons behind its director’s resignation from Byju’s board, Prosus, one of the earliest and largest investors in the edtech company, later stated that the Indian firm’s executive leadership “regularly disregarded advice and recommendations relating to strategic, operational, legal, and corporate governance matters” despite repeated efforts.
Subsequently, Byju’s appointed BDO as its statutory auditor for five years. It also formed an advisory council, which included Rajnish Kumar, former State Bank of India chief and current chairman of BharatPe, and Mohandas Pai, former chief financial officer of Infosys.
Recently, Byju’s founder Byju Raveendran’s net worth has plummeted to zero, according to the Forbes Billionaire Index 2024. Last year, his net worth was $2.2 billion (approximately Rs 17,545 crore).
The Byju’s Rollercoaster Ride
Established in 2011, edtech giant Byju’s quickly gained prominence and became India’s most valuable startup, with its peak valuation reaching $22 billion in 2022.
The company, a brainchild of Byju Raveendran, revolutionized the education sector with its innovative learning app, serving students from primary school to MBA aspirants.
However, recent financial disclosures and growing controversies have severely impacted the company’s fortunes.
In April 2023, Byju’s faced a major setback when the anti-money laundering agency Enforcement Directorate (ED) conducted searches, seizing various ‘incriminating’ documents and data.
Following this, in May 2023, BlackRock cut Byju’s valuation to about $8.4 billion.
The challenges deepened with the release of Byju’s overdue financial results for the fiscal year ending March 2022, which revealed a substantial net loss exceeding $1 billion.
In November 2023, Byju’s reported a 6 percent reduction in operating losses for its core online education business for the fiscal year 2021-22, while revenue more than doubled.
During the same month, the Enforcement Directorate issued a show-cause notice to Byju’s for an alleged Rs 9,362.35 crore violation under the Foreign Exchange Management Act (FEMA).
In November, tech investor Prosus NV significantly cut Byju’s valuation to under $3 billion, an 86 percent decrease from its peak valuation of $22 billion in 2022, citing governance and cashflow problems.
Finally, in January 2024, BlackRock further slashed Byju’s valuation by 95 percent to $1 billion.
The drastic valuation cuts came amid media reports that Raveendran pledged his homes to secure funds for staff salaries.
This followed the exit of several Byju executives and board members, prompted by a delay in the company filing its 2021/22 financial results.
The Last Bit, As all doors are closing for Byju’s, it would be interesting to see what cards Byju Raveendran plays from here on.
The location of the $533 million sought by lenders remains a mystery. It seems that this money may have been kept for themselves and perhaps will never see the light of day.
