Byju's files for bankruptcy in America
Salary delays, liquidity woes, investor concerns—and now a $1.2 billion debt default sees action to oust co-founder and CEO Byju Raveendran
Leading edtech company Byju's has deferred the payment of January salaries to its employees, citing liquidity challenges. The company, which assured its workforce in December that salaries would be disbursed on the first day of each month, communicated the delay through an email to its employees.
Its American arm has also filed for bankruptcy, even as investors have initiated action to crowbar co-founder and CEO Byju Raveendran away from the helm.
The email to employees attributed the delay in salary disbursements to an "artificially induced crisis by select investors". This comes in the wake of investors calling for an extraordinary general meeting (EGM) to address concerns related to governance, alleged financial mismanagement and compliance matters.
In a bid to reassure employees, the email stated that salaries would be paid in a phased manner, starting on 2 February and concluding by 5 February. Notably, Byju's founder and CEO, Raveendran, has pledged his only home to ensure the company's financial security.
Byju's recent struggles are further highlighted by its intention to secure funding through a rights issue, aiming for a post-money valuation of $225 million. This represents a substantial 99 percent decrease from its previous valuation of $22 billion. Investors have advocated for a restructuring of the Board of Directors and a shift in leadership.
Once celebrated as India's most valuable startup, Byju's has faced a tumultuous 2022, dealing with challenges such as accounting irregularities, alleged mis-selling of courses and significant layoffs. Over the past year, the company has implemented substantial workforce reductions, witnessed key board members departing and been embroiled in disagreements with founder Raveendran.
To address these challenges, Byju's has taken steps such as securing additional capital from early investor Ranjan Pai, forming an advisory council, and promoting Arjun Mohan to the role of CEO. Discussions about potential divestment of assets, including Great Learning and Epic, are also in progress.
Meanwhile, the American arm of Byju's, Alpha Inc., has filed for bankruptcy after defaulting on a $1.2 billion debt. This comes a day after key investors initiated actions to oust co-founder and CEO Byju Raveendran. The court-appointed CEO of Alpha Inc., Timothy Pohl, cited a lack of funds to defend against litigation as the reason for initiating Chapter 11 insolvency proceedings in a Delaware court.