Why is Byju's Facing National and International Heat, Both Financially and Legally?

Byjus has been in deep trouble everywhere, be it with its own and former employees or in domestic and international courts. 

A group of lenders to Byju's recently said that a US bankruptcy court is set to penalize Riju Ravindran, a board member of the company and brother of founder and CEO Byju Raveendran, for not disclosing or determining the location of funds related to a term loan. Ravindran is part of an ongoing dispute between Byju’s and its lenders over a $1.2 billion term loan. Both sides have been discussing early repayment of the loan. 

Read: Byju’s Receives Fresh Notices from NCLT Over Unpaid Dues: Report

Judge John Dorsey of the United States Bankruptcy Court for the District of Delaware stated that Ravindran's testimony was not credible and found him in contempt for not providing information about $533 million from the loan, which is managed by Byju's US subsidiary, Byju's Alpha, as per the lenders. 

The judge concluded that Ravindran either knows where the funds are or is deliberately avoiding finding out, which led to the contempt ruling for not complying with a previous order to provide this information. 

So, what’s happening with the missing $533 million? 

While accusing Byju's of hiding the $533 million, a group of lenders said in September that the edtech platform hid the money in a three-year-old hedge fund. 

As per the lenders, in 2022, Byju's transferred more than half a million dollars to a hedge fund named Camshaft Capital Fund that was founded by 23-year-old William C. Mortan. The investors have alleged that, despite not having any formal training in investing, the money was received by the fund. The court papers have also shown how a 2023 Ferrari Roma and a 2014 Rolls-Royce Wraith have been registered under the name of Morton since the money transfer. Mortan has also been found in contempt of court. The money was moved from Byju's Alpha to Inspilearn, another completely owned US-based company of Byju's, at the beginning of 2023. After that, Inspilearn moved that money from Camshaft to a fund that wasn't established in the United States. 

After the court’s order, the lenders said that they would continue to take action to recover stolen funds. 

Why are companies dragging Byju’s to the NCLT?

The trouble for Byju’s doesn’t seem to end. `

The companies that filed the cases include publishing company McGraw Hill, supplier of automation control products AG Automation, and BPO service provider Cogent E-Services. Byjus owes Rs 6 crore to Cogent E-Services and Rs 1.43 crore to McGraw Hill. The edtech company has been given two weeks to respond. 

Meanwhile, a group of investors—Peak XV Partners, General Atlantic, Chan-Zuckerberg Initiative, and Prosus—has already filed an “oppression and mismanagement plea’ against Byju’s. 

The Board of Control for Cricket in India (BCCI), Teleperfomance Business Services Company, and Glas Trust Company have also filed an insolvency plea against Byju’s in the NCLT. The BCCI was the first to file the plea and said that Byjus had defaulted on a Rs 158 crore payment. To join the list is Chinese electronic manufacturer Oppo, which filed an insolvency plea against Byju’s on May 1. 

Anger fumes among employees

Investors aren’t the only ones that have dragged Byju’s to the NCLT. The company laid off around 5,00 employees last month in what the company referred to as a “business restructuring exercise." Amid the ongoing uncertainty in the company, around 1,500 employees have already left the company. 

Over 400 workers who were either let go, quit, or are still employed by Byju's have chosen to take legal action against the company for failing to pay their settlement obligations, as per a businessline report. To seek justice against the edtech firm, the group has now decided to approach the NCLT. 

So, what is next for Byju’s? Byju’s has seen high levels of resignations, mass layoffs, and disputes with lenders. The edtech start-up, once valued at $22 billion in 2022, is now valued at around $1 billion. Will chaos engulf the start-up, or will it regain its value? It remains to be seen.