Byju’s, a prominent Indian education technology startup, is currently facing a range of problems. On Tuesday (June 27), a Delaware court rejected a request by Byju’s Term Loan B lenders to investigate a $500 million transfer from its US-based subsidiary, Byju’s Alpha, to other entities. Additionally, the startup’s valuation in Prosus NV has dropped to $5.1 billion, and last Friday (June 23), all three global investors at Byju’s confirmed that their representatives had resigned from the board.
These challenges indicate a state of uncertainty for Byju’s, and it begs the question: What has gone wrong with the company in recent days?
A lawyer representing Byju’s informed Reuters on Tuesday that the startup had resolved a payment shortfall to a national pension fund. Byju’s is currently involved in a US lawsuit regarding a $1.2 billion loan. The lawyer’s statement followed reports from India’s labor ministry sources, who revealed that the Employees Provident Fund Organisation (EPFO) had identified payment deficiencies from Byju’s between August 2022 and May of this year. As per the sources, the startup has already deposited $15 million, and the remaining balance will be deposited in the coming days.
Furthermore, a Delaware court denied the request by Byju’s Term Loan B lenders to investigate a $500 million transfer from Byju’s Alpha to other entities, as reported by PTI citing sources. Byju’s refuted the allegations made by its $1.2 billion Term Loan B lenders, asserting that it had never defaulted on payments.
According to a Bloomberg report on Tuesday, Byju’s is in discussions with potential new shareholders to secure $1 billion in funding. Bloomberg’s sources mentioned that the startup is offering preferential treatment in case of liquidation to these potential investors, a benefit not extended to existing shareholders.
Last week, Byju’s experienced the departure of board members representing three global investors: Peak XV, Prosus NV, and the Chan-Zuckerberg Initiative. Furthermore, Byju’s auditor Deloitte severed ties with the company. While the reasons behind the global investors’ resignation were undisclosed, Deloitte stated that it resigned due to Byju’s delay in providing financial statements for the year ending March 31, 2022. Deloitte had also sent multiple letters to the board but did not receive the necessary documents. Byju’s has now appointed BDO as its new auditor.
In response to the resignations, Byju’s assured investors that it would submit audited earnings for 2022 by September of this year and 2023 results by December, according to a person familiar with the matter cited by Reuters.
In recent months, the company’s investors have lowered their valuation estimates. For example, Blackrock reduced its internal valuation of Byju’s by over 60% to $8.2 billion, as disclosed in reports.
Byju’s claims to be the world’s largest education technology company, offering courses in mathematics, physics, and chemistry for school students, as well as preparatory courses for competitive examinations in India.
As the Covid pandemic led to a shift to online education worldwide, Byju’s valuation skyrocketed from $5 billion before the pandemic to $22 billion last year. However, as the pandemic’s impact diminished and students returned to offline classes, the company’s growth slowed down.
Byju’s is led by its founder Byju Raveendran and his wife, Divya Gokulnath. Raveendran established the startup in 2011 and launched its app in 2015.
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