Indian ed-tech giant Byju’s, once valued at $22 billion, faces a total shutdown if insolvency proceedings continue, warned its CEO in a court filing. The financial troubles of the company could lead to thousands of employees quitting and a complete halt of its services.
Recent Setbacks
Byju’s, backed by notable investors like Prosus and General Atlantic, has faced multiple setbacks recently. These setbacks include significant job cuts, a dramatic drop in valuation, and ongoing disputes with investors. The investors have accused CEO Byju Raveendran of corporate governance lapses, allegations which Byju’s has firmly denied.
Insolvency Trigger
The current crisis emerged after an Indian tribunal-initiated insolvency proceedings. This was in response to a complaint from the country’s cricket board over an unpaid $19 million sponsorship fee. As a result, Byju’s assets have been frozen and its board suspended, escalating the company’s troubles.
CEO’s Court Appeal
In a detailed 452-page court appeal reviewed by Reuters, Raveendran explained that the insolvency process would likely cause vendors to declare defaults. These vendors provide critical services essential for maintaining Byju’s online platforms. Without these services, a “total shutdown of services” is imminent, bringing operations to a “grinding halt.” The appeal was submitted to the High Court of Karnataka by Raveendran’s counsel, MZM Legal.
Upcoming Court Hearing
The High Court of Karnataka is set to hear the case on Monday. This court hearing is crucial for the future of Byju’s, determining whether the company can halt the insolvency process and stabilize its operations. Byju’s and Raveendran have not responded to Reuters’ queries regarding the matter.
Impact on Employees and Services
Byju’s, which operates in over 21 countries, gained immense popularity during the COVID-19 pandemic by offering online courses. The company also provides in-person coaching classes. The court filing highlighted that the company’s employees, numbering around 27,000 including 16,000 teachers, could be severely affected. Many may be forced to leave if the company cannot resolve its financial issues swiftly.
CEO’s Commitment to Settle Dues
In an effort to stabilize the situation, Raveendran expressed his willingness to settle the outstanding dues to the Indian cricket board within 90 days. This move is aimed at halting the insolvency process and ensuring the company’s operations can continue without interruption.
Uncertain Future
Byju’s now stands at a critical juncture, navigating significant financial and operational crises. The outcome of the upcoming court hearing will be pivotal in determining the company’s future. If the court rules in favor of continuing the insolvency proceedings, Byju’s could face a complete shutdown, ending the journey of what was once India’s biggest startup. On the other hand, a favorable ruling could provide a lifeline, allowing Byju’s to reorganize, settle its dues, and continue its services, preserving jobs and educational resources for millions of students.
(With inputs from agencies)
