The financial woes of India’s most successful edutech company Byju’s continue to worsen as it skipped payment of $40 million interest on its $ 1.2-billion loan on June 6.
Byju’s has issued a statement saying that it has elected not to make further payments on the $1.2 billion so-called term loan B (TLB), and has accused U.S-based investment management firm Redwood of ‘predatory’ tactics. The move followed TLB lenders, led by Redwood, allegedly issuing a notice seeking immediate payment of the entire loan amount. Byju’s has countered by filing a complaint in the New York Supreme Court challenging the acceleration.
This escalation is the latest in a series of crises for the company, which began in 2021.
November 2021: Byju’s raises $1.2-billion loan
In November 2021, the edutech major raised over $1.2 billion in a term loan B (TLB) funding round for general offshore corporate purposes, which included expanding its business in North America and funding potential inorganic growth opportunities such as mergers, acquisitions, and joint ventures. The loan announcement came soon after Byju’s announced ten acquisitions in the edtech space — Tynker, Gradeup, TutorVista, Edurite, Math Adventures, Osmo, Whitehat Jr, Aakash Education Services, Epic, and Great Learning.
September 14, 2022: Group releases financial statement after 17 months
As its expansion plans progressed, the company delayed releasing its audited financial statements for two years (FY 20 and FY 21) till September 2022 — a seventeen-month delay. This caught the eye of the Ministry of Corporate Affairs which issued a letter to ‘Think & Learn’ — Byju’s parent company — seeking an explanation for the delay.
On September 14, the group finally released its audited financial statements for 2019-20 and 2020-21. As per the statements, Byju’s booked a loss of ₹4,588 crore for FY 21, nineteen times more than the preceding fiscal. The losses widened from ₹231.69 crore in 2019-20 to ₹4,588 crore in 2020-21, while revenue dropped from ₹2,511 crore in FY20 to ₹2,428 crore in FY21.
The company, however, stated that in FY 22 ending on March 31, 2022, revenue had soared to ₹10,000 crore but it did not disclose the profit or loss numbers for that year. Byju’s CEO Byju Raveendran attributed FY 21 losses to the deferment of some revenue and losses incurred from WhiteHat Jr.
September 24,2022: Byju’s clears loan payments
Days after declaring a loss amounting to thousands of crores, on September 24, 2022, Byju’s cleared $230 million payment after equity investment firm Blackstone acquired a majority stake in Aakash Educational Services. The payment of the $950-million deal was due in July but was deferred based on mutual agreement.
October 2022: Group raises funding
The group raised $250 million from its existing investors, including Qatar’s sovereign wealth fund, Qatar Investment Authority (QIA), in its third round of funding. The funding raised Byju’s valuation to $22 billion and its estimated unaudited revenue to ₹15,000 crore in FY 23 — a jump from its FY 22 estimate of ₹10,000 crores.
December 13, 2022: Lenders seek immediate payment of TLB
Lenders sought immediate repayment of part of the company’s $1.2-billion loan after the group once again breached the deadline for filing results for the year ending March 31, 2022 (FY 22). The lenders hired investment banking company Houlihan Lokey Inc. to advise them about accelerated repayment of the loan. In response, the edutech group agreed to renegotiate the loan terms, which included restructuring of its loans and increasing the interest rate.
December 17,2022: NCPCR summons Byju Raveendran
On December 17, the National Commission for Protection of Child Rights (NCPCR) summoned Byju’s CEO Mr. Byju Raveendran over complaints of luring parents or children into loan-based agreements for their courses. The company was also accused of buying phone numbers of students and threatening them, saying that their future would be ruined if they don’t buy their courses. The group strongly refuted these allegations.
The edutech platform massively expanded during the COVID-19 lockdown from a learning application with two million subscribers to a virtual institute with fifty hybrid learning centres catering to over 150 million registered students in 12 languages. In the light of the accusations, the group decided to stop selling tuition to families with an income of below ₹25,000 and put in place a revised refund policy.
March 2023: Byju’s lenders accelerate loan repayment
According to the company’s statement (issued in June), the group’s lenders in U.S led by investment management firm Redwood accelerated the TLB repayment alleging certain non-monetary and technical defaults in March 2023. Moreover, the lenders also seized control of Byju’s Alpha — the holding company for Byju’s— and appointed their own management.
Byju’s Alpha is a non-operative US entity, with no employees and no direct control over the operations of the edutech company, stated Byju’s. They added that Byju’s Alpha was set up solely to receive the Term Loan B. Byju’s and its subsidiaries along with its acquisitions is controlled by its parent company —Think & Learn Pvt. Ltd.
Bloomberg reported that the lenders have accused Byju’s Alpha of defaulting on their payments. They also sought to replace its chief Riju Raveendran, younger brother of Byju Raveendran, with their representative, Timothy R Pohl. The move triggered a legal battle between the edutech group and its lenders in US courts in Delaware and New York.
April 1, 2023: Byju’s valuation plunges
U.S Asset manager BlackRock — which owns less than 1% of Byju’s — reduced its investment by 50%, as per reports. As per BlackRock’s estimation, Byju’s per-share value was reduced to $2,400 at the end of December 2022, down from $4,600 in April 2021, adjusting its valuation to $11 billion. The group has not filed yet its annual financial statement for 2021-22 (FY 22) and 2022-23 (FY 23) as it grapples for funds.
April 29, 2023: Enforcement Directorate raids Byju’s
Back in India, the Enforcement Directorate searched two business premises of Think & Learn Pvt. Ltd. and one residential property linked to Mr. Byju Raveendran in Bengaluru on April 29. The ED stated that ₹28,000 crore of Foreign Direct Investment (FDI) received since 2011 and ₹9,754 crore overseas direct investment by the company in various foreign jurisdictions are under the scanner. The agency stated that since the company has not prepared its financial statements since FY 21 and not gotten its accounts audited, the figures provided by the company were being cross-examined with the banks.
The group maintained that as it was funded by over 70+ impact investors, due diligence including all Foreign Exchange Management Act (FEMA) compliance was done for all their operations. Mr. Raveendran added that the company was fully cooperating with the authorities and that all cross-border transactions by Byju’s were routed only through RBI’s authorised dealer banks, and the requisite documentation and statutory filings had been submitted.
May 13, 2023: Byju’s raises $250-million funding
As its US lenders seek a $200-million repayment of its $1.2 billion TLB, on May 13, the group raised $250 million funding from Davidson Kempner Capital Management — part of its ongoing $1-billion funding round. The firm invested in structured equity using convertible notes with a five-year maturity period, letting investors lend to Byju’s with the option of converting the loan into equity in the future. Some of the new capital raised by the group was to repay part of the TLB.
May 19, 2023: Byju’s Alpha accused of hiding $500 million
On May 19, lenders of Byju’s Alpha, represented by Glas Trust Company, sued the company and Tangible Play Inc — a US-based educational games maker acquired by Byju’s in 2019 — for control of Byju’s Alpha. have accused the American arm of Byju’s of defaulting on their payments and transferring half a billion dollars out of the company.
At a hearing in the Delaware Chancery Court, Byju’s Alpha stated that the moving of capital was an attempt to protect the company from predatory lenders and that they had the right to do so under their loan contract. The court has ordered the managers not to make any substantive changes in the organisation and scheduled a trial in the upcoming days to decide who will have control of the company.
June 1, 2023: Talks to restructure TLB stall
On June 1, Byju’s lenders pulled out of talks to restructure the edutech group’s TLB after they accused Byju’s of hiding $500 million of raised funds. The beleaguered group assured the lenders in court that it will soon see a large infusion of capital which will help it pay parts of the loan. The group was due to pay $40 million in interest on June 5.
June 5, 2023: Byju’s skips $40 million loan payment, sues lenders
On June 6, the company refused to make any further payment to its lenders till the dispute over its terms has been settled. The company also filed a complaint in the New York Supreme Court, challenging the acceleration of the loan payments. The group has termed the loan acceleration predatory and urged the lenders withdraw its actions to “honour the terms of the agreement.”
June 8-9, 2023: Byju’s approaches lenders one-on-one; consortium rebuffs
On June 8, the edutech group initiated one-to-one meetings with five-six lenders separately to discuss an amendment proposal for its $1.2 billion loan. However, a day later, the lenders, who signed a cooperation agreement binding them to act together, rejected such meetings, but kept the door open for negotiations to settle lawsuits and other concerns.
Despite its financial woes, Byju’s recently issued a statement declaring that the initial public offering of its recent acquisition — Aakash Education Services — has been cleared by its board for mid-2024; an indication of the group’s bid to turn its luck around.
