In the latest twist to the ongoing challenges faced by India’s ed-tech giant, Byju’s, the Enforcement Directorate (ED) has reportedly issued a show-cause notice accusing the company of violating the Foreign Exchange Management Act (FEMA). The alleged violations, amounting to a staggering Rs 9,000 crore, have been attributed to Byju Raveendaran, the founder of Byju’s and Think and Learn Pvt Ltd.
Denial amid Accusations
Byju’s swiftly responded to the ED’s claims, flatly denying the reception of any such notice. In a statement, the company asserted, “Byju’s unequivocally denies media reports that insinuate it has received a notice from the Enforcement Department. The company has not received any such communication from the Enforcement Department.”
Background: ED’s Previous Actions and Company Response
This development follows ED’s searches in April this year at three locations in Bengaluru, connected to a case against Raveendaran and his company, ‘Think & Learn Private Limited,’ under FEMA provisions. At the time, various documents and digital data were reportedly seized.
Byju’s has faced scrutiny for its foreign direct investment (FDI) activities, receiving approximately Rs 28,000 crore from 2011 to 2023. The company remitted about Rs 9,754 crore to foreign jurisdictions during the same period, allegedly under the guise of overseas direct investment. However, the company refuted these claims, stating that the ED visit was related to a routine FEMA inquiry with no violations.
Byju’s Ongoing Struggles: Financial Woes and Employee Turmoil
This notice adds to the challenges confronting Byju’s, which has been grappling with financial difficulties. The company reportedly missed a payment on a $1.2 billion term loan in June, leading to further strains on its financial health.
Moreover, Byju’s has witnessed disruptions in its leadership, with statutory auditors and external board members resigning due to reported “differences between the management and the board members.” The recent delay in settling laid-off employees’ dues has added to the company’s predicaments.
Byju’s Attempts to Navigate the Storm
Despite these hurdles, Byju’s has taken steps to resolve certain issues. The company recently settled a longstanding dispute with Davidson Kempner about covenants in its subsidiary, Aakash. Ranjan Pai, the chairman of the Manipal Group, acquired the debt investment of the US Hedge Fund in a significant Rs 1,400-crore deal.
Additionally, Byju’s submitted a proposal to its $1.2-billion Term Loan B lenders, outlining plans to repay the loan within the next six months. The company aims to initiate the repayment process with an initial payment of $300 million within the next three months.
Financial Performance amidst Turmoil
Despite the challenges, Byju’s reported a robust financial performance earlier this month. The company disclosed a remarkable 2.3 times growth in revenue, reaching Rs 3,569 crore at the end of FY22. The EBITDA loss of the core business reduced from Rs 2,406 crore to Rs 2,253 crore during the same period.
Byju’s Raveendran expressed confidence in the company’s path, stating, “BYJU’S will continue on the path of sustainable and profitable growth in the coming years.” As the ed-tech giant faces regulatory scrutiny, financial hurdles, and internal restructuring, its ability to navigate these turbulent waters will be closely watched in the ever-evolving landscape of India’s ed-tech sector.
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