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Wednesday, May 29, 2024

Byju’s Controversies: Challenges Impacting India’s Largest Edtech Company

Byju’s, India’s most successful edtech business, is facing financial difficulties as its US entity has filed for bankruptcy. Shareholders with around 30% ownership in the corporation seek changes to the management structure and may approach the National Corporation Law Tribunal (NCLT). Byju’s is struggling to pay its employees’ salaries and is utilizing layoffs to reduce costs. According to a PTI report, Byju’s has obtained a $300 million commitment from its investors.

The problem with Byju’s is that its valuation has dropped to nearly 10% of its all-time high of $22 billion. The company is also facing a standoff from its investors who want changes in the managerial structure. Even Byju Raveendran, the company’s founder, removed from the post of CEO. In November 2023, a court in Delaware, US, upheld the lender’s right to acquire Byju’s US unit Alpha Inc after it failed making interest payments several times. Recently Alpha Inc has filed for bankruptcy proceedings saying that it is unable to pay the loans.

Directorate of Enforcement (ED), India’s financial crime unit, has issued a notice to Byju’s parent firm Think & Learn and Byju over alleged foreign exchange violations of Rs 9,362.35 crore. The problems started in 2022 when regular classes started after being disrupted during the pandemic. Byju’s had expanded rapidly during Covid-19.

Byju’s has raised total funding of $5.08 billion till May 12, 2023. The biggest investors in Byju’s are Ranjan Pai and Mohandas Pai, Sequoia Capital, Innoven Capital, Sofina Group, Times Internet, and the International Finance Corporation. In 2017, Byju’s raised funding from Verlininvest and signed Shah Rukh Khan as its brand ambassador.

Byju’s has acquired entities such as Great Learning Pvt. Ltd., Epic!, Aakash Educational Services Ltd., Whitehat Jr., Osmo, TutorVista, and Edurite from Pearson. Whitehat Jr. contributed majorly to the losses of Byju’s, but Byju’s later denied the claims.

Currently, there are three members in the board of Byju’s: Byju Raveendran, his wife and co-founder Divya Gokulnath, and his brother Riju Raveendran. In June 2023, the representatives of key investors Prosus, Peak XV Partners, and Chan Zuckerberg Initiative resigned from the board due to differences with the founders.

Byju Raveendran is the group CEO of the company, but some investors have called for an extraordinary general meeting (EGM) to replace him. Arjun Mohan, a former student of Raveendran, was appointed as Byju’s India CEO in October 2023.

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Source: Business Standard

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