Byju’s faces insolvency: NCLT orders takeover by resolution professional

Indian edtech giant Byju's, once valued at $22 billion, is now on the brink of insolvency after a tribunal order on Tuesday, 16 July, deepening the crisis that has seen the company’s valuation plunge to less than $2 billion.

The order follows a dispute with the Indian cricket board over $19 million in unpaid dues, which led the National Company Law Tribunal (NCLT) to appoint an interim resolution professional to oversee the company, suspending its board of directors.

Byju's, founded by Byju Raveendran and his wife Divya Gokulnath, has grown into what it claims to be the 'world's largest education technology company', offering online tutorials for school students on subjects such as math, physics and chemistry.

The company's value skyrocketed from $5 billion pre-pandemic to $22 billion in 2022, driven by a surge in the demand for online education during the peak Covid-19 years and a series of acquisitions. However, in recent years, Byju's has faced significant setbacks, including investor confidence crises, job cuts and a sharp drop in valuation.

The current insolvency proceedings stem from a dispute with the Board of Control for Cricket in India (BCCI) — over payments related to sponsorship rights for the Indian cricket team's jerseys.

The NCLT stated that Byju's parent company, Think & Learn Pvt Ltd, had defaulted on approximately Rs 1.59 billion ($19 million) due to the BCCI.

Despite the tribunal's ruling, Byju's remains hopeful of an amicable settlement. A company spokesperson stated, "As we have always maintained, we wish to reach an amicable settlement with BCCI and we are confident that, despite this order, a settlement can be reached. In the meantime, our lawyers are reviewing the order and will take necessary steps to protect the company’s interests."

The NCLT's appointment of Pankaj Srivastava as the interim resolution professional means that he will now oversee the management of Byju's, with the board of directors' powers being suspended.

The BCCI had filed a suit under section 9 of the Insolvency and Bankruptcy Code (IBC) 2016, which allows creditors to take control of a company from its current management.

Investor relations have also been turbulent for Byju's. In February, a group of shareholders, including tech investor Prosus, alleged "financial mismanagement and compliance issues" at the company, calling for the removal of CEO Byju Raveendran and a reconstitution of the board.

Although Byju's has denied these allegations, the dispute with investors has further destabilised the company. Prosus wrote off the value of its 9.6 per cent stake in Byju's in June, marking the Dutch firm as the first to fully write off its investment in the troubled start-up. 

Adding to the turmoil, Deloitte resigned as Byju's auditor in 2023, citing delays in financial statements for the year ending 31 March 2022. The resignation followed several unsuccessful attempts to obtain necessary documents from the company.

This was followed by the resignation of three board members representing Peak XV Partners (formerly Sequoia Capital India), Prosus and the Chan Zuckerberg Initiative respectively.

Byju's has seen significant executive turnover in recent months as well, with the departure of its chief financial officer, Ajay Goel, in October 2023 and India CEO Arjun Mohan in April. Advisors Rajnish Kumar and T.V. Mohandas Pai also left the company in July.

Prosus’ recent decision to write off its investment came shortly after Byju’s had raised $200 million in a rights issue at a drastically reduced valuation of $225 million, representing a 99 per cent discount from its peak valuation.

As the company's valuation has plummeted, so has the net worth of its founder. According to the Forbes Billionaire Index 2024, Byju Raveendran’s net worth has now fallen to zero.

The future of Byju's now hinges on the efforts of the appointed resolution professional and the company's ability to navigate its myriad financial and managerial challenges.