All Is Not Well At Byju’s: Layoffs, Debt Woes, Legal Fight, Govt Inspection, Auditor Resignation & More

The company has also petitioned to disqualify US-based hedge fund Redwood who, contrary to the terms of TLB, purchased a significant portion of the loan while primarily trading in distressed debt.

New Delhi: Byju’s, arguably the world’s most valuable edtech startup, has been facing multiple crises in the last one year. Byju’s business boomed during the pandemic period when all educational institutions were closed down. But the pandemic boom did not last for long because of multiple reasons — it is still doubtful how much e-learning could replace traditional schooling, tuition classes, or coaching centers for that purpose; Byju’s has faced multiple allegations of trying to coerce its customers, and also providing sub-standard services.

Byju’s Auditor, Board Members Step Down

Deloitte Haskins & Sells, the statutory auditor of Byju’s parent Think & Learn Pvt. Ltd for six years, announced on Thursday that it is leaving the company with immediate effect. Deloitte cited long-delayed statements for the financial year ended 31 March 2022, reported Mint. Deloitte was last year, appointed as the auditor for Byju’s-owned Aakash Educational Services Ltd and unit Aakash EduTech Pvt. Ltd.

In other news, the three external directors of Think & Learn Pvt. Ltd. put down their papers earlier this month, the Mint report said quoting two people aware of the development. As per the report, the three directors represent Peak XV (formerly Sequoia Capital), Chan Zuckerberg Initiative (CZI), and Prosus Ventures. While Peak XV owns around 6 per cent in Think & Learn, while CZI owns 2.5-3 per cent, and Prosus 9 per cent. The resignations were discussed at a shareholders’ discussion on Sunday, the report added.

“The company has 30 days legally before it needs to tell the Registrar of Companies about the resignations,” one of the two people mentioned in the Mint report said.

On Thursday, Think & Learn Pvt Ltd named BDO (MSKA & Associates) as the statutory auditor of the company and all its subsidiaries.

“The board members had been wanting to resign for several months, but the company was keen they stay on till the funding round was stitched,” the second person mentioned in the report said.

In its resignation note, Deloitte cited five letters it wrote to founder and managing director Byju Raveendran and board members on 30 September, 5 November, 12 November, and 24 December last year, and a final one to Raveendran on 29 March this year, regarding the statutory audit for FY22, the report said. After an 18-month delay only, Byju’s filed the report for FY22.

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

Govt Orders Inspection Of Byju’s

The corporate affairs ministry under the union government ordered for an inspection of edtech startup Byju’s last week, CNBC-TV18 reported on Friday, citing sources.

As per the news channel, the ministry has taken cognizance of various corporate governance lapses at Byju’s.

ED Probe On Byju’s

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

ED said that various incriminating documents and digital data were seized during the raids that were conducted at two business and one residential premise related to the edtech company.

According to the probe agency, the company received foreign direct investment (FDI) worth Rs. 28,000 crore between 2011 and 2023. It remitted approximately Rs. 9,754 crore to various foreign jurisdictions during the same period in the name of overseas direct investment. ED further said that the action was taken on the basis of “various complaints” received by private people and alleged that Bjyu Raveendran was issued “several” summonses but he remained “evasive and never appeared” before the ED.

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

“We are committed to delivering high-quality educational products and services to our customers across India and the world. We remain focused on our mission to transform the way students learn and prepare for their future,” the company statement added.

Layoffs After Layoffs At Byju’s

Earlier this month, Byju’s sacked 1000 employees that includes contractual employees and those in the sales team, as per a report on The Morning Context.

In February this year, Byju’s laid off nearly 1,500 employees, as reported by Mint. In October last year, Byju’s had laid off around 2,500 people accounting for 5 per cent of its workforce. In the same month, Byju’s founder and chief executive officer, Byju Raveendran had assured employees that no further layoffs beyond the planned 2,500 staff.

Debt Woes & Legal Battle Of Byju’s

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

The company has also petitioned to disqualify US-based hedge fund Redwood who, contrary to the terms of TLB, purchased a significant portion of the loan while primarily trading in distressed debt.

Byju’s has raised $6 billion in total from investors like 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 reduced the valuation of the edtech giant, this time to about $8.4 billion.

BlackRock cut the value of Byju’s share by 62 per cent in the quarter ended March this year, from a year ago, the investor disclosed in a filing. This is a sharp decrease from the peak valuation of $22 billion at which the edtech decacorn was last valued in 2022.

In April this year, Byju’s lenders sought from the company $200 million in prepayment along with a higher rate of interest in order 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 volunteered to raise the interest rate by about 200 basis points (bps), however, it is yet to agree upon the prepayment clause put forth by the lenders, which include a number of US-based hedge funds, as per the report.