Byju's, Once Valued At $22 Billion, Faces Shutdown Amid Insolvency Proceedings
Co-Founder and CEO Byju Raveendran said the company would face shutdown if a resolution professional takes control over it.
Troubled ed-tech company Byju's is facing a shutdown amid ongoing legal and financial issues, its Co-Founder and Chief Executive Byju Raveendran warned while filing a an emergency petition with the Karnataka High Court, seeking orders for the National Company Law Appellate Tribunal to speed up the hearing of its appeal against the insolvency order.
The high court has directed the tribunal to hear Byju's appeal on Monday, according to its order. Raveendran said in the court appeal that the company would shut down entirely if a resolution professional takes control.
Byju's is seeking an amicable resolution with the Board of Control for Cricket in India while also planning to appeal against the NCLT insolvency order, according to people familiar with the matter.
Byju's, once valued at $22 billion, has experienced a sharp decline, worsened by the reopening of schools after the Covid-19 pandemic, which reduced the demand for its online education services. In January, BlackRock reduced Byju's valuation to $1 billion.
The company's troubles began two years ago when it missed financial reporting deadlines and failed to meet revenue projections by more than 50%. In February, a group of investors, including Prosus and Peak XV, attempted to remove Raveendran during an extraordinary general meeting, citing allegations of mismanagement and failures. Raveendran has denied these allegations and contested the validity of the vote.
A key issue in Byju's financial problems is the "Team Sponsor Agreement" with the BCCI, established on July 2019. This agreement gave Byju's exclusive rights to display its brand on the Indian cricket team's kit, advertise during cricket telecasts, and receive tickets for every BCCI-organised match. In return, Byju's had to pay a sponsorship fee to the BCCI.
Byju's met its payment obligations only until March 2022, and fully paid for the India-South Africa series in June 2022. However, it failed to settle subsequent invoices, resulting in a shortfall even after a bank guarantee of Rs 143 crore was encashed. The unpaid sponsorship fees for various series and tours from August 2022 to January 2023 amount to Rs 158.9 crore.
The NCLT order pointed out that Byju's had utilised the BCCI's services but failed to meet its financial commitments, pushing the company further into insolvency.
