Byju's is facing its biggest crisis ever as it aims to avert a potential shutdown
It remains to be seen if it can overcome insolvency and avert a potential shutdown.
Byju's, the largest learning app for primary and high school pupils in India, which was once valued at $22 billion in 2022, is facing its biggest crisis ever: averting a potential shutdown.
As with most startups, Byju's has faced macroeconomic constraints and layoffs in thousands, but perhaps what appears to be the beginning of its woes is a 2023 probe by the Enforcement Directorate (ED), India's crime-fighting agency, into its financial transparency with investigations that question "the genuineness of the figures provided by the company," in its financial records.
Emmanuel Oyedeji
In January 2024, its valuation was marked down to approximately $1 billion by the world's largest asset manager, BlackRock.
Now, in what could be its undoing, Byju's allegedly owes the Board of Control for Cricket in India (BCCI) $19 million for a sponsorship deal. The BCCI, clearly not fans of Byju's aggressive sales techniques, decided to take the company to court.
To make matters worse, the court has initiated insolvency proceedings against the embattled edtech giant, its assets have been frozen and its board has been suspended. Its CEO, Byju Raveendran has also been accused of corporate governance lapses.
Raveendran has denied any wrongdoing, maintained Byju's innocence in the BCCI dispute and has appealed the court's decision to initiate insolvency proceedings.
What could this mean for the future of Byju's?
If Byju's fails to reach an agreement with the BCCI or get a favorable ruling from the tribunal in the insolvency proceedings, it would likely appeal the decision at the Supreme court, a process which could last several months.
Under the provisions of the Insolvency and Bankruptcy Code, 2016, a committee of creditors will make a decision on how to recover pending dues from the company and will have up to 330 days to find a buyer for the company who will then recover money to pay the existing dues. However, if the committee is unable to find a buyer, the tribunal could order liquidation of Byju’s.
That means that the company would have to shut down its services, leaving thousands of employees jobless and its over 150 million registered students without a learning app.
Whether Byju's can overcome this hurdle and avert a potential shutdown remains to be seen. The company's future hinges on the court's ruling and its ability to navigate its current financial woes.
Even if Byju's avoids insolvency, it will still need to rebuild investor confidence and address its financial issues to ensure its long-term survival.
