Byju’s Raveendran: ‘Yes, we are broke now, but we will rebound’

Byju Raveendran tells The Hindu that he and other founders have a three-pronged strategy to bring back the company from the brink

Byju Raveendran recently admitted to presspersons that Byju’s net worth is indeed zero. Facing two bankruptcy cases, one in India and another in the U.S., and after an adverse Supreme Court ruling, Mr. Raveendran seemed to be signing off, saying goodbye. But he tells The Hindu that he was only facing facts when he said it but that didn’t mean he was giving up on what he calls his life’s mission.

He recalls the heady days when the Byju’s Learning App was launched in 2015. Mr. Raveendran says the app revolutionised education delivery: “Our learning app achieved download numbers previously seen only in entertainment and sports apps. With support from investors who believed in our vision, we grew from a local tutoring firm in Bengaluru to a global education company, reaching learners from primary school to professionals. From our bootstrapped beginnings, we achieved what many thought impossible: scaling to $200 million in revenue by 2020 while remaining profitable. Around this time, many large investors exited with windfall profits and many others queued up to invest in the company.” The erosion of capital flowed in the later rounds of investment, he says, adding equity is a risk-laden instrument.

He and other founders have a three-pronged strategy to bring back the company from the brink: Regain board control 2) Initiate fresh investment 3) Restore normalcy by paying overdue creditors and ensuring cashflow for salaries and overheads from company funds. Currently, all funds inflow is from their personal savings and borrowings, according to Mr. Raveendran.

Mr. Raveendran acknowledges past errors while outlining revival plans: Acquisition of as many as 26 education brands, which included market leaders such as Aakash, Osmo, WhiteHat Jr., Great Learning and Epic. The ambitious initiative had its downside: Challenges in managing integration, maintaining quality control, and sustaining financial stability. Further, the company overestimated potential for growth and entered too many markets too quickly, he says.

The management of Byju’s admits to shortcomings in corporate governance. Mr. Raveendran says the mistakes included a board that lacked experience with large-scale companies, an over-reliance on investor input, and insufficient oversight mechanisms to manage the complexities of the expanding organization.

Many of the distributors and resellers (and some company sales staff as well) indulged in pressure selling in the initial years, he says, adding that while this has been corrected, and emphasis now placed on organic and online sales (wherein the student or parent makes the decision to enroll in a program), it will take time to alter negative public perception.

The revival plan

Mr. Raveendran has a three-point action plan for revival.

Fresh investment: This ranks as the top priority of the founders. A brand that has been battered, beaten and almost written off has not lost its core strength: the power to educate, according to Mr. Raveendran. This year, the parent and subsidiary companies are expected to clock a combined revenue of ₹5,500 crore, which may pique the interest of a discerning investor, he adds.

New management: Family leadership may be a thing of the past. The plan now is to onboard fresh talent from the corporate world. Mr. Raveendran and family members would switch to a strategic role and delegate operations to professionals. As part of the transformation, key investors on the cap table would be invited to nominate management resources.

Controlling cash burn: Other than the $ 1.2 billion term loan which is repayable at a later date, liabilities have been reduced from $ 75 million to $ 50 million. Operational expenses have been pruned, and overheads have been reduced, according to Mr. Raveendran.

The elephants in the room

What cannot be ignored is the elephant in the edtech classroom – real ongoing courtroom battles. Here is an overview:

Byju’s U.S. entity Alpha, Inc., availed a term loan of $1.2 billion from two U.S. banks. Primary lenders sold parts of the debt into the secondary market. Byju’s objected to change in lender table without its consent. The consortium of lenders, represented by GLAS Trust LLC (GLAS) initiated proceedings to take control of Alpha, Inc. and filed a bankruptcy plea in a Delaware court. The matter is now between courts in Delaware and New York, with Byju’s stating the term loan as per contractual obligation is due in the year 2026, and GLAS is seeking prepayment and penal interest.

In July 2024, the National Company Law Tribunal (NCLT) admitted the application of the Board of Control for Cricket in India (BCCI) for initiation of corporate insolvency proceedings against Think & Learn Private Ltd, the parent company of Byju’s, for defaulting on an amount of ₹ 158.90 crore, due towards sponsorship contract of the Indian cricket team.

At the Supreme Court, on October 23, 2024, the three-judge Bench headed by the Chief Justice of India opined that there was a grave deviation of procedure in bringing the case to the National Company Law Appellate Tribunal (NCLAT) (the Appellate hears appeals against NCLT orders). Except for this, the rest of the judgement is not in favour of Byju’s, with the Bench upholding the locus standi of U.S.-based trustee GLAS which had filed the appeal against the NCLAT decision to allow a ₹158 crore settlement between Byju’s and the Board of Control for Cricket in India (BCCI).

The court noted that the issues raised are the subject matter of several litigations in different for a, including the Delaware Court and investigation by various authorities, including the Enforcement Directorate, which are pending.

Quoting the Insolvency & Bankruptcy Code (IBC), the bench, however, said that the code “must not be used as a tool for coercion and debt recovery by individual creditors. Improper use of the IBC mechanism by a creditor includes using insolvency as a substitute for debt enforcement or attempting to obtain preferential payments by coercing the debtor using insolvency proceedings. That the mechanism under the IBC must not be used as a money recovery mechanism has been reiterated in a consistent line of precedent by this Court.”

A Supreme Court lawyer who didn’t wish to be identified opines that based on the Supreme Court order, Byju’s should first approach the National Company Law Tribunal and the Committee of Creditors (CoC). He points to point 87 in the judgement that states that “the parties are at liberty to invoke their remedies, to seek a withdrawal or settlement of claims, in compliance with the legal framework governing the withdrawal of Corporate Insolvency Resolution Process.”

In the above instance, wherein the timeframe for remedies, withdrawal of claims and conduct of investigation cannot be estimated or foreseen, Byju’s may approach the Supreme Court and submit a Review Petition, according to the legal counsel.

Amid a multitude of challenging circumstances such as employee apprehension about salary payments, creditors’ clamour for settlement, and no fresh investment in sight, will the founders emerge wiser and stronger?

Published - November 06, 2024 09:26 am IST