All is not well at Byju’s: layoffs, indebtedness, legal battles, government inspection, accountant firing and more

The company also petitioned to disqualify US-based hedge fund Redwood, which, in violation of TLB’s terms, bought a significant portion of the loan while trading primarily distressed debt.

New Delhi: Byju’s, arguably the world’s most valuable edtech startup, has faced multiple crises in the past year. Byju’s business thrived during the pandemic period when all educational institutions were closed. But the pandemic boom didn’t last long for multiple reasons: it’s still questionable how much e-learning could replace traditional teaching, tuition, or coaching centers for that purpose; Byju’s has faced multiple allegations of attempting to coerce its customers and also to provide substandard services.

Byju’s accountant, board members resign

Deloitte Haskins & Sells, the statutory auditor of Byju’s parent company Think & Learn Pvt. Ltd for six years, announced on Thursday that it would leave the company effective immediately. Deloitte cited long-delayed statements for the fiscal year ended March 31, 2022, Mint reported. Deloitte was appointed last year as an auditor for Aakash Educational Services Ltd, owned by Byju, and unit Aakash EduTech Pvt. Ltd.

In other news, the three outside directors of Think & Learn Pvt. Ltd. filed their papers earlier this month, the Mint’s report said, citing two people who knew about the development. According to the report, the three directors represent Peak XV (formerly Sequoia Capital), Chan Zuckerberg Initiative (CZI) and Prosus Ventures. While Peak XV owns about 6 percent in Think & Learn, while CZI owns 2.5-3 percent and Prosus 9 percent. The resignation was discussed at a shareholder meeting on Sunday, the report said.

“The company has 30 days by law before it must notify the Registrar of Companies of the layoff,” said one of the two individuals named in the Mint report.

On Thursday, Think & Learn Pvt Ltd appointed BDO (MSKA & Associates) as a commissioner of the company and all of its subsidiaries.

“The board members had been wanting to step down for several months, but the company was keen for them to stay on until funding was secured,” said the second person named in the report.

In its letter of resignation, Deloitte cited five letters it had written to founder and CEO Byju Raveendran and board members on September 30, November 5, November 12 and December 24 last year, and a final one to Raveendran on March 29 this year, regarding the statutory audit for FY22, the report said. After a delay of just 18 months, Byju’s submitted its report for FY22.

“We have not received any communication regarding the resolution of the amendments to the audit report with respect to the year ended March 31, 2021, the audit readiness status of the financial statements and underlying books and records for the year ended March 31, 2022, and we have not been able to begin the audit on the date,” Deloitte said in its letter of resignation.

Government orders inspection of Byju’s

The Ministry of Business Affairs under the union government last week ordered an inspection of edtech startup Byju’s, CNBC-TV18 reported Friday, citing sources.

According to the news channel, the ministry has learned of several corporate governance abuses at Byju’s.

ED probe on Byju’s

In April this year, India.com reported that the Enforcement Directorate has conducted searches at three properties in Bengaluru owned by Byju’s CEO Byju Raveendaran and his company ‘Think & Learn Private Limited’ (Byju online learning platform) under the provisions of FEMA.

ED said several incriminating documents and digital data were seized during the raids carried out at two companies and one residential building related to the edtech company.

According to the research firm, the company received foreign direct investment (FDI) worth Rs. 28,000 crore between 2011 and 2023. It paid about Rs. 9,754 crore to various foreign jurisdictions in the same period in the name of foreign direct investment. ED went on to say that the action was taken on the basis of “several complaints” received from private citizens, claiming that Bjyu Raveendran had been served “several” subpoenas, but he remained “evasive and never appeared” before the ED.

However, a spokesman for Byju’s had said the ED action was a “routine investigation” and that the company “has been completely transparent with the authorities and provided them with all the information they requested”.

“We are committed to providing quality educational products and services to our customers in India and around the world. We remain focused on our mission to transform the way students learn and prepare for their future,” the company statement said.

Fired after being fired at Byju’s

Earlier this month, Byju’s laid off 1,000 employees, including contract workers and those in the sales force, according to a report on The Morning Context.

In February this year, Byju laid off nearly 1,500 employees, as reported by Mint. By October last year, Byju’s had laid off about 2,500 people, representing 5 percent of its workforce. In the same month, Byju’s founder and CEO, Byju Raveendran, had assured employees that there would be no further layoffs beyond the planned 2,500 staff.

Debt problem and legal battle for Byju’s

Byju’s has defaulted on repaying $40 million to US lenders and is also filing a case with the New York Supreme Court because lenders accelerated demand for a $1.2 billion Term Loan B.

The company also petitioned to disqualify US-based hedge fund Redwood, which, in violation of TLB’s terms, bought a significant portion of the loan while trading primarily distressed debt.

Byju’s has raised a total of $6 billion from investors such as Qatar Investment Authority, BlackRock, Chan Zuckerberg Initiative, Sequoia, Silver Lake, Bond Capital, Tencent, General Atlantic and Tiger Global.

US-based asset manager BlackRock has again downgraded the edtech giant’s valuation, this time to around $8.4 billion.

BlackRock lowered the value of Byju’s stock by 62 percent in the quarter ending March this year from a year ago, the investor said in a filing. This is a sharp drop from the $22 billion peak valuation at which the edtech decacorn was last valued in 2022.

In April this year, Byju’s lenders asked the company for $200 million in prepayment along with a higher interest rate to restructure its $1.2 billion (Rs 9,600 crore) Term Loan B (TLB), ET reported quoting people with direct knowledge of the matter.

The Bengaluru-headquartered company has voluntarily offered to raise interest rates by around 200 basis points (bps), but it has yet to agree on the prepayment clause drafted by its lenders, which include a number of US-based hedge funds, as per the report.