New Delhi. Byjus founder Byju Raveendran has suffered a major legal setback in the US. The court there has issued a default order of 1.07 billion dollars against the company. This case was going on regarding the loan related to Byju’s US unit Byjus Alpha Inc which was challenged in the court by the lender GLAS Trust Company. This order has increased the problems of the company manifold because this decision now has a direct impact on the global reputation of the company.
On the other hand, in India also Byjus is already in deep trouble. Wage disputes, retrenchment of employees, outstanding payments, investors’ cases, audit reports and mismanagement of acquisitions have brought the company towards insolvency. Now the situation is that Corporate Insolvency Resolution Process i.e. CIRP has started against the company in India.
Where did Byjus’ crisis start?
Byjus was India’s largest edtech brand and its value had once reached $22 billion. The company made several acquisitions to raise money and expand rapidly. But these acquisitions shook the foundation of the company as many deals were neither profitable nor practical. The biggest financial pressure on the company increased when the cost of these acquisitions far exceeded the cash coming into the company. In between, revenues fell, the edtech market shrank and investors started withholding funds.
Expensive deals in 2020-22
Aakash Educational Service
This company is known for coaching and medical entrance preparation. Byjus had bought it for about $95 crore. This was one of the biggest edtech deals in Indian startup history.
white hat junior
The coding and skill program company was bought by Byjus for about $300 million. Later this deal became a cause of loss for the company because its expenses were not matching with the company’s income.
Many more companies were purchased
Companies like Great Learning, Toppr, Epic were also bought which were worth hundreds of millions of dollars. The objective of these deals was to bring Byjus school, coaching, skill, and global edtech market under one umbrella. But in reality, running these companies proved to be very expensive.
How did the situation worsen now?
The debt on Byjus kept increasing. Reports of not being able to pay salaries started coming. WhiteHat Jr had to be shut down. Investors initiated legal action against the company. The government started a forensic audit of the company.
Gradually the situation became so bad that the company was forced to start CIRP i.e. insolvency process so that the correct resolution of the company’s assets could be found. This process leads any company in trouble to two paths. First, the company should be reestablished and restructuring should take place. Second, the company should find completely new buyers.
Who showed interest?
Many big companies have shown interest in the assets of Byjus.
- Manipal Group – This group has expressed its intention to buy some profitable shares of Byjus.
- Ronnie Screwvala- He is also said to be involved in talks to buy the assets of the company.
Some global edtech companies are also showing interest in content and tech platforms. The aim of all these potential buyers is to choose those parts of Byjus from which they can benefit further.
Byju Raveendran’s role
The pressure on Byju Raveendran has increased manifold as he will now have to face legal challenges both in India and the US. They have termed the US order as wrong and have said that they will appeal against it. But the question is whether the company has enough time or energy left to continue this fight for a long time. Efforts are on to save the company in India. The professional resolution officer is evaluating the assets of the company and talks are going on with bidders. If a strong buyer comes forward, the company’s share can be sold and the business can move forward.
