BYJU’S US arm files for bankruptcy; investors call for board ouster

Amid mounting troubles for ed-tech major BYJU'S, its US unit has filed for "Chapter 11" bankruptcy proceedings in the US’ Delaware court. BYJU'S US unit Alpha's listed liabilities remain in the range of $1 billion to $10 billion, while its assets are valued between $500 million to $1 billion, the court filing shows. Its creditors are in the range of 100 to 199.

The current development comes after some foreign lenders of BYJU'S last week had filed an insolvency plea against the company before the National Company Law Tribunal's (NCLT) Bengaluru bench. They have collectively extended over 85% of BYJU's entire $1.2 billion Term B loan. 

Separately, in the wake of a string of controversies, a group of investors of BYJU'S reportedly want to restructure the board by removing its existing members, including Byju Raveendran, from the company board. In their third notice, the investors have again sought an EGM (extraordinary general meeting). They want to adopt key resolutions on governance, compliance, and mismanagement of funds, among others. 

They want to "address persistent issues relating to corporate governance, mismanagement and compliance".

BYJU'S parent Think and Learn Private Ltd (TLPL) this week launched a fundraising programme worth $200 million by way of a rights issue, in which existing shareholders can participate. As per the company, the founders of BYJU's, as the largest shareholders, have already invested over $1.1 billion in the company in the last 18 months.

BYJU’S Byju Raveendran said that this rights issue is about those who care the most about “BYJU'S stepping up”. He even assured that BYJU'S was now less than a quarter away from achieving operational profitability.

Over the past two years, the homegrown ed-tech company has been battling problems on all fronts -- from crash crises to mass layoffs to the violations of FEMA (Foreign Exchange Management Act) rules. Recently, BJU's warned about its ability to "continue as a going concern" in the wake of mounting losses and legal issues. 

The company recently said accumulating losses and uncertainty over the outcome of the litigation related to the $1.2 billion Term Loan B facility indicate “a material uncertainty”. It “may cast significant doubt on the company’s ability to continue as a going concern," said BYJU’s.

Raveendran-led company, in the latest filing of its audited FY22 financials with the Finance Ministry's Registrar of Companies (RoC), reported a manifold increase in losses worth ₹8,245 crore for the said fiscal year, primarily driven by mounting losses in its two units -- White Hat Jr and OSMO.

The issues of massive losses, cash crunch, firings, FEMA violations, and governance problems have led to a massive fall in BYJU’S valuation. U.S.-based global asset manager BlackRock this month had also cut the value of its stake in India's foremost ed-tech major to $1 billion from $8.4 billion in May 2023. The current drop in the valuation is a staggering 95% for a company that was valued at $22 billion in early 2022.