From layoffs to legal hurdles: What’s going on at Byju’s?

By Koustav Das: Edtech giant Byju’s has seen a sharp turnaround in its fortunes since last year, and the success story of India’s most valuable start-up seems to have turned sour, even as its CEO Byju Raveendran remains optimistic about the company’s future.

In a virtual town hall held on Thursday, Raveendran assured employees that the “best is yet to come” for Byju’s, but vaguely addressed the challenges that have been plaguing one of India’s most valuable start-ups.

So, what’s going on at Byju’s?

The edtech company has been battered by a barrage of challenges over the past year, starting off with multiple rounds of layoffs, in which thousands of employees have been let go.

Its problems have compounded over the past few months, with investigations launched by the Enforcement Directorate (ED), some high-profile board exits, multiple valuation cuts, delayed financial results, and even an ongoing legal battle over a $1.2 billion term loan.

Layoffs

It all started in 2022 when the company announced plans to lay off 2,500 employees. The edtech firm’s CEO apologised to the employees who were let go, saying he was “truly sorry”, but added that the macroeconomic conditions forced the company to take the difficult decision.

But the layoffs did not stop there.

The edtech major started a fresh round of layoffs earlier this year, in which another 1,000 employees across departments are being axed. This was done to further cut costs.

While layoffs across technology companies were not uncommon last year, recent reports indicate that Byju’s is looking at cutting more jobs to save costs. It has also been revealed that the company has asked employees to resign voluntarily, without any prior communication.

A recent report indicated that hundreds of employees found out on June 16 that it was their last working day. Their email addresses were discontinued and their identity cards were confiscated. One affected employee recently shared his story on LinkedIn, saying that he was asked to leave despite being available 24/7.

“I don’t know where it was my fault,” the employee wrote on LinkedIn and added that he worked ‘very hard’ throughout his time at Byju’s.

“I never applied 10 to 8 work culture in my life. I was always available 24/7 for my company but they came and told me to resign immediately. I am not complaining about BYJUS, they helped me last year when I needed a job,” he added.

A manager at the company told news agency Reuters the abrupt layoffs have hit employees’ morale and many want to leave before being fired.

“Morale is at an all-time low. Literally, every person has a job portal open on their laptop at all times. Everyone wants to leave desperately before they are asked to pack up overnight,” a senior manager at Byju’s said.

“Right now the situation is so dismal, subordinates are sitting with their managers and job hunting,” the Byju’s employee said.

Byju’s has also been accused of not paying its employees the provident fund since the month of October 2022. It took a statement from EPFO board member Raghunathan KE to calm the situation. He said the Employees Provident Fund Organisation (EPFO) will ensure that all Byju’s employees receive their pending provident fund (PF) dues.

Byju’s has even deferred offer letters to incoming employees for six months, reported Business Today. Some employees who were set to join the company said their employment offer letters have been postponed by up to six months, with some individuals now being informed that their joining has been further delayed until January 2024.

Hit by investigation

Byju’s is also facing heat from the ED after the agency conducted searches and seizures at three of its premises in Karnataka’s Bengaluru in connection. This was a result of a case lodged against Byju Raveendaran and his company ‘Think & Learn Private Limited’ – the parent firm of Byju’s – under the provisions of the Foreign Exchange Management Act (FEMA).

The agency said that various incriminating documents and digital data were confiscated during the searches. Officials from ED said the searches revealed that the “company has received FDI investment to the tune of Rs 28,000 crore during the period from 2011 to 2023.

Also Read | Explained: Why Edtech start-up Byju’s is facing heat from ED

“Further, the company has also remitted Rs 9,754 crore to various foreign jurisdictions during the same period in the name of overseas direct investment,” said the agency. It was also revealed that the company booked around Rs 944 crore in the name of advertisement and marketing expenses, including the amount remitted to foreign jurisdictions.

In response, Byju’s legal team spokesperson issued a statement after ED’s operation, calling it a “routine inquiry under FEMA”.

“We have been completely transparent with the authorities and have provided them with all the information they have requested. We have nothing but the utmost confidence in the integrity of our operations, and we are committed to upholding the highest standards of compliance and ethics,” said the spokesperson.

The spokesperson added that Byju’s will continue to work closely with the authorities to ensure that they have all the information they need.

In fact, Byju Raveendran sent an email to employees to assure them that the company had been compliant with FEMA regulations.

Legal battle over $1.2 billion loan

Byju’s is also embroiled in a legal battle with lenders. It all started after the edtech firm missed its quarterly interest payment of around $40 million or Rs 330 crore on a loan taken in November 2021.

The interest payment on the Term Loan B or TLB was due on June 5, but Byju’s decided against paying it and instead sued its lenders. It is currently locked in a court battle against American investment management firm Redwood.

Also Read | Why Byju’s sued lenders over its $1.2 billion loan

It may be noted that a TLB refers to a type of loan that is provided by institutional investors, such as mutual funds, private equity firms, or hedge funds, to finance large-scale corporate transactions. These loans usually have a fixed interest rate and a longer-term maturity, ranging from five to seven years.

Byju’s has accused Redwood of accelerating its demand to repay the $1.2 billion loan, which is a primary reason for the edtech firm’s financial troubles.

The fate of the loan is now caught in a legal battle in Delaware and New York courts, meaning that Byju’s will not make the payment as long as the matter is resolved.

Board exits, auditor resignation and valuation cuts

Last week, Byju’s was hit by more bad news, with three crucial board members exiting the company. GV Ravishankar, managing director at Peak XV Partners (formerly Sequoia Capital India), Russell Dreisenstock of Prosus (previously Naspers) and Chan Zuckerberg Initiative’s Vivian Wu have left the board.

Adding to the edtech company’s problems, its official auditor, Deloitte, also quit on the same day, following which Byju’s appointed BDO (MSKA & Associates) as its statutory auditor.

Raveendran said Deloitte had left on “amicable terms” and that it was a mutual decision. But Deloitte resigned, saying it had not been provided with the necessary documents it sought to complete the audit on time.

Also Read | Byju’s seeks to raise $1 billion to stave off investor revolt: Report

In a letter to board members of Think & Learn Private Limited, Byju’s parent company, Deloitte said the financial statements for year ended March 31, 2022 are long delayed. It added that the delay would significantly impact their ability to plan, design, perform and complete the audit. Therefore, the firm decided to resign.

Byju’s has informed investors that it will file the 2022 audited earnings by September and 2023 results by December.

Moreover, top investors of Byju’s are cutting their valuations for the edtech firm. Dutch-listed technology investor Prosus recently slashed the valuation of the troubled edtech start-up to $5.1 billion, as per its annual report.

In addition, US-based investment management firm BlackRock has also slashed Byju’s valuation multiple times. Earlier this year, it slashed Byju’s to $8.3 billion.

Also Read | Byju’s CEO assures employees of strong comeback amid ongoing crisis

Twist of fate

Byju’s shot to fame during the two dreaded pandemic years when demand for online learning skyrocketed. It quickly surpassed its competitors (and acquired some along the way) to become India’s most valued edtech brand. It invested heavily in scaling up operations, both in India and across the globe.

Backed by deep-pocketed investors, who were confident about the future of the edtech sector, Byju’s became India’s most valuable start-up in 2021, with an astounding valuation of $22 billion.

That year was probably Byju’s best, in terms of toppling competition, fundraising, business expansion and growth. But as the pandemic-fuelled demand for online education started fading, Byju’s faced a crippling slowdown, forcing it to cut costs and maybe, some corners.

As the edtech firm faces its most difficult challenge since inception, prominent personalities have called out the company on social media over its business practices, while experts are questioning its valuation.

Also Read | Byju’s allegedly buying children’s phone numbers, threatening parents and rigorously stalking them

However, CEO Byju Raveendran remains optimistic about the future. At a virtual town hall held on Thursday, he said the best of Byju’s is yet to come. Will Byju’s be able to overcome the storm? Only time will tell.