Byju's has witnessed a staggering decline of approximately 90 per cent in the past year.
The fate of Byju Raveendran, founder and CEO of ed-tech giant Byju's, hangs in the balance as an extraordinary general meeting (EGM) of its investors is scheduled to take place today. A consortium of shareholders, including the global tech investor Prosus, aims to dethrone Mr Raveendran and install a new board.
Byju's, once hailed as one of India's most profitable start-ups with a valuation exceeding $20 billion, has witnessed a staggering decline of approximately 90 per cent in the past year. The ed-tech firm, propelled by the surge in demand for online learning during the Covid pandemic, now grapples with a series of crises. Key investors withdrew support, Deloitte resigned as the auditor, and a legal feud with US lenders over a $1.2 billion loan added to the turmoil.
Ahead of the meeting, Byju's claimed that the Karnataka High Court had ruled any decisions made at the meeting would be "invalid" until the next hearing, asserting that the move is a mere "smokescreen" to disrupt the company's management and control.
Despite the court order, the meeting will proceed, with the intention to push for Mr Raveendran's removal as CEO. Byju's alleges that investors, including General Atlantic and the Chan Zuckerberg Initiative - a venture of Facebook founder Mark Zuckerberg and his wife Priscilla Chan - violated shareholder agreements by calling for the meeting.
Probe Agency Notice
Adding to Mr Raveendran's problems, the Enforcement Directorate (ED) yesterday upgraded its Look Out Circular (LC) against him in connection with a Foreign Exchange Management Act (FEMA) probe.
The Look Out Circular, initially issued over a year ago, has undergone recent modifications to address investor apprehensions and the evolving nature of the FEMA probe. The ED has requested the Bureau of Immigration to enhance the circular, to ensure that Mr Raveendran does not leave the country.
The probe agency's move comes in the wake of a substantial foreign exchange violation show cause notice, exceeding Rs 9,300 crore, issued against Byju's and Mr Raveendran in November last year. The probe agency cited multiple grounds for the charges, including the alleged failure to submit import documents against advance remittances made outside India and delays in filing documents related to exports made outside India against the Foreign Direct Investment (FDI) received by the company.
Earlier this month, a foreign unit of Byju's, based in the US state of Delaware, filed for bankruptcy, listing liabilities in the range of $1 billion to $10 billion.
The Downfall
Byju's started its venture in 2006 by offering classes for MBA aspirants preparing for the CAT exam. Over the years, the edtech firm diversified its offerings, extending its reach from postgraduate to undergraduate and eventually school students. In 2015, it launched Byju's learning app, setting the stage for the company to become India's first ed-tech unicorn in just four years.
The Covid pandemic became a turning point for Byju's as schools closed their doors, and education transitioned swiftly to online platforms. Byju's seized the moment, launched an extensive marketing campaign, and hired thousands to meet the demands of online education during the pandemic.
The company secured sponsorship deals with the Indian cricket team, and even roped in football maestro Lionel Messi as a global ambassador.
However, allegations of a toxic work atmosphere and aggressive marketing practices that allegedly harassed parents began to surface. Prosus, a major shareholder, slashed Byju's valuation by a staggering 75 per cent, triggering a cascade of events.
Mass layoffs ensued culminating in the company losing billions and getting entangled in a series of legal troubles.