Rising and Subsequent Decline of Byju's: An Unforeseen Journey
Byju's, the Indian edtech giant, is currently navigating a severe legal and financial crisis. The company and its founder, Byju Raveendran, are preparing to file legal claims seeking at least $2.5 billion in damages against Glas Trust and other parties, accusing them of causing substantial harm to the company and themselves. These claims are being filed in multiple jurisdictions amidst ongoing insolvency proceedings related to a $1.2 billion term loan.
The insolvency proceedings have taken a significant turn with the Supreme Court recently rejecting pleas by Byju's co-founder Riju Raveendran and the Board of Control for Cricket in India (BCCI) to withdraw the insolvency proceedings against Think & Learn, Byju’s parent entity. This marks a judicial setback for Byju's attempts to halt the insolvency process.
Raveendran, in a public statement, has denied allegations that his family personally profited from the company’s financial distress. He stated that any wealth was reinvested to keep Byju’s running, revealing personal sacrifices including selling his home and mortgaging his future to sustain the firm.
Glas Trust’s lawyers alleged in a US bankruptcy court hearing that Raveendran might be negotiating with high-level Indian officials to make unofficial payments to resolve regulatory penalties. However, no evidence was presented to support this claim.
Byju's founder has characterized the ongoing issues as a “corporate raid” orchestrated by debt buyers, emphasizing that the company claims to have no loans due until 2026 and has been servicing interest faithfully, suggesting that the insolvency efforts are hostile actions by creditors.
Background
Byju's, India's most valuable start-up in 2022, worth an estimated $22 billion, attracted big-name backers like Mark Zuckerberg, BlackRock, and Prosus. The company, launched as a digital platform in 2015, offering smartphone- or tablet-based learning, aimed to revolutionize education in India. Byju's sold tutoring services to help children prepare for competitive school entrance exams.
The company expanded into the US market and was transformed into a billion-dollar start-up with investments from the Chan Zuckerberg Initiative and Sequoia Capital. However, rising interest rates and the drying up of cheap money led to a plunge in the value of the company, forcing investors to write off stakes worth hundreds of millions of dollars.
Deloitte, the auditor for Byju's, pulled out in 2022 citing delayed financial statement submissions. The pandemic lockdowns accelerated Byju's growth via mergers and acquisitions internationally.
Legal Battles
Byju's is currently embroiled in legal battles, including with the Qatar Investment Authority and India's national cricket authority. Raveendran has launched a countersuit against his US lenders, accusing them of unfairly accelerating loan terms and negotiating in "bad faith". Riju Raveendran, the sole director of US-based Byju's Alpha, was asked to explain the whereabouts of $533 million by a US judge.
Questions are being asked about corporate governance and management practices at Byju's. Raveendran, who was traveling to nine cities a week across India for maths classes in packed stadiums, wrote a memo to Byju's remaining (unpaid) staff in August, stating he felt like a man screaming into a hurricane of hurdles.
Byju's founders, including Raveendran, his wife Divya Gokulnath, and brother Riju, are reportedly living in Dubai's affluent Emirates Hills. The company is facing insolvency proceedings in India, and the future of this once-promising edtech startup remains uncertain.
- Despite the legal and financial crisis confronting Byju's, the company has been actively exploring investments in technology to advance its digital learning platform, believing that education-and-self-development through technology is crucial for the future.
- The escalating conflict between Byju's and Glas Trust has led to debates about the role of finance in business, with some questioning whether high interest rates might have contributed to Byju's current predicament, hindering its growth and investors' returns.
- Amidst these challenges, Byju's founder, Byju Raveendran, continues to insist that the company's gold profile, acquired through years of successful operations and investments, will remain a competitive advantage, allowing it to rebound from this present difficulties and maintain its position in the global education market.
