Byju's Great Fall: Valuation Decline, BCCI Legal Feud & ED Notice Stand

The tough period for edtech behemoth Byju's continues as now it is grappling with a barrage of new challenges, including a valuation downgrade by tech investor Prosus and a legal battle with the Board of Control for Cricket in India (BCCI) over pending dues. The issue over notice from the Enforcement Directorate (ED) on FEMA violations is also going on. In the midst of the storm, a spokesperson for Byju's told TICE News that company is commited to regulatory compliance and confident of successfully dealing with the case.

Prosus Marks Down Byju's Valuation Again

In a significant blow to Byju's, tech investor Prosus has once again downgraded the valuation of the edtech giant. This marks the third time in a year that Prosus has slashed the value of its stake in Byju's, resulting in a company valuation of less than USD 3 billion. The latest downgrade represents an alarming 86 percent decline from the previous funding round valuation of USD 22 billion.

This downward spiral began in November of the previous year when Prosus first cut Byju's fair value to USD 5.97 billion. Subsequent downgrades followed in June, with the fair value dropping to USD 5.1 billion. Now, with the valuation dipping below USD 3 billion, Byju's faces heightened scrutiny and challenges in the ever-evolving landscape of edtech.

BCCI Drags Byju's to NCLT Over Pending Dues

Adding to Byju's woes, the Board of Control for Cricket in India (BCCI) has taken the embattled edtech firm to the National Company Law Tribunal (NCLT). While the case was officially filed on September 8, it was officially registered only on November 15. The dispute revolves around pending dues, and the case is scheduled for a hearing on December 22, as per information available on the NCLT website.

Byju's spokesperson told media, "We are in discussions with the BCCI to settle the matter, and we hope to achieve that soon." The legal tussle with BCCI compounds the challenges already faced by Byju's on multiple fronts.

Byju's Responds to ED Notice on FEMA Violations

In a parallel development, Byju's has responded to the Enforcement Directorate's (ED) notice regarding FEMA (Foreign Exchange Management Act) violations. A spokesperson for Byju's told TICE News that the notice from ED pertains to technical issues, specifically the delay in filing Annual Performance Reports (APRs) related to compliant Overseas Direct Investment (ODI) of approximately Rs 8000 crores. The delay resulted from the statutory audit for the fiscal year 2022.

We are in receipt of the notice from the Enforcement Directorate which now definitively concludes their investigation and the same has been stated in their press release dated November 21.

The queries received in the notice are solely technical in nature such as delay in filing Annual Performance Reports (APRs) with respect to duly compliant ODI investments of close to (~) INR 8000 crores that arose from the delayed statutory audit (FY22).

The Company has however filed requisite intimation contemporaneously for all FDI which is received in accordance with the eligibility criteria in law and not affected by the alleged non filing of APR. The Company has also issued/allotted shares within the prescribed time against the FDI so received.

This is being clarified to dispel any misgivings about wrong doing in relation to receipt of FDI or allotment of shares. The Company is advised that the delayed filing of APR (particularly when returns in relation to receipt of FDI have been filed in time) is a technical issue and the Company is confident of successfully dealing with the case.

Based on precedent actions by the Adjudicating Authority, we anticipate that the fines, if any, will be nominal. To cite an example, the Late Submission Fee for such reporting delays that can be imposed pursuant to the RBI regulations with respect to APRs is very nominal (₹7500) and by no means does the notice denote a fine.

We would like to strongly emphasise that the ED notice does not specify any quantum of fine but rather highlights the quantum of FDI/ODI (~ 9,000 crore) along with the deadlines that we missed in the reference period for this quantum.

We want to reassure you that BYJU'S maintains and will continue to maintain complete adherence to all relevant FEMA regulations, as verified by comprehensive due diligence conducted by reputable law firms. 

Byju's affirmed its commitment to adhering to all relevant FEMA regulations and urged media outlets to avoid exaggerated reporting, assuring complete cooperation with the authorities.

Board Exits, Layoffs, and Other Challenges

Byju's has been grappling with a series of challenges, including board exits, layoffs, and delayed financial settlements for laid-off employees. In July, Prosus' representative on Byju's board, Russell Dreisenstock, stepped down, citing poor reporting and governance structures. This departure was accompanied by exits from other notable board members, including Vivian Wu from Chan Zuckerberg Initiative and GV Ravishankar from Peak XV Partners (Sequoia Capital India).

The company faced criticism for delayed financial results and the resignation of its auditor, Deloitte. Additionally, Byju's came under fire for postponing the full and final settlements of laid-off employees, shifting the payment date from September to November.

Despite these challenges, Byju's successfully resolved a longstanding issue with Davidson Kempner in November, and Manipal Group chairman Ranjan Pai bought out the debt investment linked to Byju's subsidiary Aakash in a Rs 1,400-crore deal.

In September, Byju's submitted a proposal to lenders, expressing its intention to fully repay its USD 1.2 billion term loan B within the next six months. The company plans to initiate this repayment with an initial payment of USD 300 million in the coming three months.

Byju's, once celebrated as an edtech giant, finds itself in the midst of a storm, grappling with valuation downgrades, legal disputes, and internal challenges.

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