Summary –
BYJU’S’ Challenges and Threats
• National Company Law Tribunal (NCLT) accepts BCCI’s request for corporate insolvency resolution procedure (CIRP) against BYJU’S.
• US-based lenders’ insolvency petition added to CIRP.
• BYJU’S forced to close hundreds of offline instruction centers.
• Rumors suggest BYJU’S hasn’t submitted tax deducted at source (TDS) to Income Tax department since July last year.
At BYJU’S, the bad times never seem to stop. Three new trends threaten to derail the edtech behemoth, which was once India’s most valuable company and considered the crown jewel of the Indian startup ecosystem until three years ago.
First, the National Company Law Tribunal (NCLT) has accepted the BCCI’s request to launch a corporate insolvency resolution procedure (CIRP) against BYJU’S. Another insolvency petition by US-based lenders has been added to this resolution procedure.
Second, the firm has forced to close hundreds of offline instruction centers, as Inc42 exclusively disclosed this week.
Third, there are rumors that BYJU’S Datalabs_in-article-icon has reportedly not submitted the tax deducted at source (TDS) to the Income Tax department since July of last year.
Either of these may cause an existential crisis for a firm, but the combination of the three — along with the hundreds of other issues at BYJU’S — threatens to pull the Byju Raveendran-led company down.
For example, BYJU’S is also in a crisis, with investors trying to step in and take control of the firm, which is claimed to be running out of money. Since 2022, BYJU’S has shed more than 5,000 workers in order to stay in business.
Byju’s is an Indian multinational educational technology firm based in Bengaluru. It was established in 2011 by Byju Raveendran and Divya Gokulnath. Byju’s requested a $200 million value in January 2024, a significant decrease from its highest valuation of $22 billion in 2022.
As of April 2023, the firm claims to have more than 150 million enrolled pupils.According to the Times of India, Byju’s lay off roughly 500 people in April 2024, the most of them were from its sales and marketing divisions.
The firm’s numerous problems have significantly harmed investor trust, with shareholders bringing the company to court over a disputed rights issue, in which the company is seeking new capital at a post-money valuation of $225 million. That is a 99% decrease from its worth of $22 billion in 2022.
According to Reuters, BYJU’S intends to fight the NCLT judgment and will file an appeal in Delhi to halt insolvency proceedings.
Meanwhile, the NCLT has designated insolvency practitioner Pankaj Srivastava as the interim resolution professional in the BCCI case. In addition to the BCCI’s appeal, Srivastava will hear the insolvency petitions of US-based lenders of BYJU’S Term Loan B, as mandated by the NCLT earlier this week.
For the time being, the firm has filed an appeal with the NCLAT about the insolvency procedure. There is no guarantee that the appeal will be successful. So, what does it imply for BYJU’S and its future if the CIRP is permitted to continue?
In July 2024, the National business Law Tribunal (NCLT) accepted ed-tech business Byju’s parent Think and Learn to bankruptcy resolution procedure, after a plea filed by the Board of Control for Cricket in India (BCCI) for unpaid dues of over ₹158 crores.
It doesn’t help that the online learning industry cannot compensate for the downturn on the offline front. BYJU’s internal sales efforts have not paid off, and the firm is operating without many of the capabilities it previously depended on, such as SaaS CRM and sales tracking tools.
Online-first is no longer the defining feature of education technology. BYJU’S is not the only company struggling to sell online courses. The industry as a whole is experiencing headwinds.
In May of this year, a CEO of a competing edtech business, which also has a substantial presence in the offline arena, told Inc42 that BYJU’S’s issues had harmed the Indian edtech sector. “We were only able to meet 40% of the goals.
Previously, during a talk at February’s ASU+GSV & Emeritus Summit, upGrad’s Ronnie Screwvala stated that the industry’s reputation is suffering as a result of ‘one bad fruit’.
However, the ground reality is that, from Physicswallah to Unacademy to Vedantu and other edtech platforms, the emphasis is on offline and hybrid online-offline models, which offer a more obvious income prospect.
Many of these organizations face their own challenges, such as Unacademy’s leadership turnover and PhysicsWallah’s risk on many products, but none are in as dire a financial situation as BYJU’S.
So far, BYJU’S has paid wages from the cash earned by monthly sales, as demonstrated in May 2024. However, considering that many offline businesses have already closed, can the organization survive only on this monthly income collection?
CONCLUSION : BYJU’S, once India’s most valuable company, faces threats from the National Company Law Tribunal (NCLT) and US-based lenders. The NCLT has accepted BCCI’s request for a corporate insolvency resolution procedure, forced hundreds of offline instruction centers to close, and rumors suggest BYJU’S has not submitted TDS to the Income Tax department.
