‘Premature & baseless’: BYJU’s on foreign lenders moving NCLT

Adding woes to the company’s already existing legal and financial challenges, foreign lenders of India's ed-tech star BYJU's have filed an insolvency plea against the company before the National Company Law Tribunal (NCLT). The insolvency petition was reportedly filed earlier this week before the Bengaluru bench of the tribunal. The foreign lenders of the company have extended over 85% of its entire $1.2 billion Term B loan.

BYJU's termed the lenders' actions as "premature and baseless" and questioned the timing of the proceedings, saying it coincides with the start of a rights issue by its parent Think & Learn.

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. The current development, too, comes just days after the company warned about its ability to "continue as a going concern" in the wake of mounting losses and legal issues.

Revealing its FY22 performance, the company 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.

On the current actions of the lenders, the company says the matter is pending before the court. "As we have stated before, the validity of lenders’ actions, including acceleration of the term loan, is pending and under challenge in several proceedings, including before the New York Supreme Court. Hence, any proceedings by lenders before NCLT are premature and baseless," a BYJU's statement issued today says.

The company adds the current actions of its lenders appear to be based, in part, on the failure of Whitehat Education Technology Pvt Ltd, a wholly-owned subsidiary of its parent Think & Learn, to guarantee the term loan. “This is despite the fact that provision of such a guarantee would contravene extant RBI regulations. Proceedings are on foot before the Delaware appellate courts on this very issue,” BYJU’s adds.

Notably, in December 2023, reports had said the ed-tech titan was looking at clearing the entire Term B $1.2 billion loan to its lenders by selling its overseas acquisitions Epic and Great Learning.

Previously too, the lenders made “unsuccessful attempts” to interfere with BYJU’S rights to deal with capital provided under the loan agreement, the company adds. The Delaware Chancery Court, it says, has “refused” to let the lenders do so.

According to the company, the Delaware court “refused to interfere with BYJU’S rights to disqualify distressed asset fund lenders under the loan agreement”, who, it says, are taking these steps to get BYJU’s to “succumb to their extortionate demands”.

BYJU’s assures that it has been in regular touch with the lenders and that it even involved them in the sales process of “some of its prized US subsidiaries to settle matters”. The online tutor says the legal process does not reflect its “true financial standing” nor does it accurately represent its “ability to meet obligations”.

Byju Raveendran-led Think & Learn Pvt, the parent company of BYJU's reported a manifold increase in losses worth ₹8,245 crore for the fiscal year 2021-22, driven by mounting losses in its units White Hat Jr and OSMO. Its revenue, however, surged significantly in the year to ₹5,298.43 crore against ₹2,428.39 crore in FY21.