Byju Raveendran recently admitted to the press that Byju’s net worth is zero. Faced with two bankruptcy cases, one in India and the other in the US, and after the Supreme Court’s adverse decision, Mr. Raveendran seemed to sign his death, saying goodbye. But he told me The Hindu that he only faced the facts when he spoke but that does not mean that he gave up on what he called the mission of life.
He recalls the happy days when the Byju Learning App was launched in 2015. Mr. Raveendran says that the app revolutionized education: “Our learning app has achieved download numbers that were previously only seen in entertainment and sports apps. With the support of investors who believe in our vision, we grew from a local tutoring company in Bengaluru to a global education company, reaching students from elementary school to professionals. Around this time, many large investors exited with windfall profits and many others lined up to invest in the company. The capital erosion flowed into the next round of investment, he said, adding to equity as a risky instrument.
He and other founders have a three-pronged strategy to bring back the company from the brink: Regain control of the Board 2) Start fresh investment 3) Restore normality by paying late creditors and ensure cashflow for salaries and overheads from the company’s funds. Currently, all funds come from savings and personal loans, according to Mr. Raveendran.
Mr. Raveendran acknowledged his past mistakes when explaining his revival plan: The acquisition of 26 educational brands, which include market leaders such as Aakash, Osmo, WhiteHat Jr., Great Learning and Epic. Such ambitious initiatives have their drawbacks: The challenge of managing integration, maintaining quality control, and maintaining financial stability. Furthermore, the company overestimated the potential for growth and entered too many markets too quickly, he said.
Byju’s management admits to deficiencies in corporate governance. Mr. Raveendran said the mistakes included the board’s lack of experience with large-scale companies, over-reliance on investor input, and insufficient oversight mechanisms to manage the complexity of the growing organization.
Many distributors and retailers (and some of the company’s sales staff as well) liked to sell under pressure in the early years, he said, adding that this has been corrected, and now the emphasis is on organic and online sales (where students or parents make the decision to enroll in the program ), it takes time to change the negative public perception.
Revival plan
Mr. Raveendran has a three-point action plan for revival.
Fresh investment: This is the top priority of the founders. A brand that has been trashed, beaten and almost destroyed has not lost its core strength: the power to teach, according to Mr. Raveendran. This year, the parent company and its subsidiaries are expected to post a combined profit of ₹ 5,500 crore, which is likely to attract interest from savvy investors, he added.
New management: Family leadership may have occurred. The current plan is to source new talent from the corporate world. Mr. Raveendran and his family members will shift to strategic roles and delegate operations to professionals. As part of the transformation, key investors at the closing table will be invited to nominate management resources.
Controlling the cash burn: In addition to the $1.2 billion term loan that will be paid later, liabilities have been reduced from $75 million to $50 million. Operational expenses have been trimmed, and overheads have been reduced, according to Mr. Raveendran.
The elephant in the room
What we can’t ignore is the elephant in the edtech classroom – the constant courtroom battles. Here is a summary:
US entity Byju Alpha, Inc., secured a $1.2 billion term loan from two US banks. The primary lender sells a portion of the loan to the secondary market. Byju objected to change the creditor’s table without consent. A consortium of lenders, represented by GLAS Trust LLC (GLAS) started the process to take control of Alpha, Inc. and filed a bankruptcy petition in a Delaware court. The matter is currently between the courts in Delaware and New York, with Byju claiming the term loan is a contractual obligation due in 2026, and GLAS seeking prepayment and penal interest.
In July 2024, the National Company Law Tribunal (NCLT) admitted the Board of Control for Cricket in India’s (BCCI) application to initiate corporate insolvency proceedings against Think & Learn Private Ltd, the parent company of Byju’s, for defaulting on an amount of ₹ 158.90 crore, due to a sponsorship contract from Indian cricket team.
In the Supreme Court, on October 23, 2024, three judges headed by the Chief Justice of India opined that there was a serious procedural irregularity in bringing the case to the National Company Law Appellate Tribunal (NCLAT) (Appeal hearing. appeal against NCLT order). Apart from this, another judgment did not go well with Byju, with the Bench upholding the locus standi of the US-based trustee GLAS which had filed an appeal against the NCLAT decision to allow the ₹158 crore settlement between Byju and the Board. from Control for Cricket in India (BCCI).
The court noted that the problem raised is the subject of several different litigations for a, including the Delaware Court and investigation by various authorities, including the Directorate of Enforcement, which is pending.
Citing the Insolvency & Bankruptcy Code (IBC), the bench said that the code “should not be used as a tool for coercion and debt recovery by individual creditors. Improper use of the IBC mechanism by creditors includes using insolvency as a substitute for debt enforcement or trying to obtain payment preferentially by forcing the debtor to use insolvency proceedings.The mechanism in the IBC should not be used as a mechanism for recovery of money has been explained in consistent lines of precedent by this Court.
A Supreme Court lawyer who did not want to be identified said that based on the Supreme Court order, Byju should approach the National Company Law Tribunal and the Committee of Creditors (CoC). He pointed to point 87 in the judgment which states that “the party is free to request remedies, to request the withdrawal or settlement of claims, in accordance with the legal framework governing the withdrawal from the Corporate Insolvency Resolution Process.”
In the above example, where the time for remedy, withdrawal of claims and investigative actions cannot be estimated or predicted, Byju can approach the Supreme Court and submit a Review Petition, according to legal counsel.
In the midst of many challenging situations such as the anxiety of employees about the payment of salaries, the advice of creditors for settlement, and the absence of new investments, will the founders become wiser and stronger?
Published – November 06, 2024 09:26 IST
