The once-mighty Byju’s has found itself in the throes of a corporate insolvency resolution process (CIRP). The National Company Law Tribunal (NCLT) has admitted the company’s parent, Think and Learn Pvt Ltd, into insolvency proceedings, setting the stage for a tumultuous chapter in the company’s history.
The insolvency proceedings were triggered by a claim filed by the Board of Control for Cricket in India (BCCI), which alleged that Byju’s had failed to pay dues amounting to a staggering ₹158 crore. This sponsorship contract for the Indian cricket team had been a significant part of Byju’s branding strategy, with the company also having partnerships with the International Cricket Council (ICC) and FIFA. However, the company’s financial woes led it to announce the discontinuation of these high-profile collaborations in mid-2023.
The NCLT’s decision on July 16, 2024, marked the beginning of the CIRP for Byju’s. The tribunal appointed Pankaj Srivastava as the interim resolution professional (IRP), tasked with managing the company until a Committee of Creditors (CoC) is established. This shift in control means that Byju’s current management will step down, and the company will be run by the creditors through the IRP.
The CIRP now places the fate of Byju’s in the hands of the CoC, which has up to 330 days to find a buyer for the company through a bidding process. If successful, Byju’s could potentially be revived. However, if a buyer is not found within this period, the NCLT may order the liquidation of the company.
Byju’s woes: Unpaid salaries, PF contributions, and vendor dues
The insolvency proceedings have unveiled a web of financial troubles for Byju’s. Not only has the company defaulted on payments to the BCCI, but it has also failed to deposit the tax deducted at source (TDS) from its employees’ salaries with the government since as early as July 2023. This is a prosecutable offense, with the potential for the company’s directors to face jail time.
Moreover, Byju’s has been struggling to pay its employees’ salaries and provident fund (PF) contributions. Several current and former employees have reported delays or non-payment of their dues, with some not receiving their full and final settlements even after leaving the company. The company’s financial distress has also led to delays in payments to vendors, with firms like Surfer Technologies, Cogent E-services, McGraw Hill Education India, and iEnergizer Services all filing significant claims against Byju’s.
Byju’s meteoric rise to become India’s most valuable startup, with a valuation of $22 billion, was a testament to the country’s appetite for edtech solutions. However, the company’s rapid expansion, aggressive marketing tactics, and alleged accounting irregularities have all contributed to its current predicament.
The impact on employees, investors, and the edtech Sector
The insolvency proceedings have left Byju’s employees in a state of financial and emotional turmoil, with many struggling to make ends meet due to delayed or unpaid salaries and PF contributions. The situation has also drawn the ire of the company’s investors, such as Peak XV, Prosus, and General Atlantic, who have been attempting to block the rights issue and replace the top management.
The downfall of Byju’s, once hailed as the poster child of the Indian edtech industry, has sent shockwaves through the sector. This high-profile case has raised questions about the sustainability of the industry’s growth model and the need for stronger governance and financial oversight.
Lessons from Byju’s downfall
The Byju’s saga serves as a cautionary tale for startups and investors alike. It highlights the importance of financial prudence, transparent accounting practices, and responsible growth strategies. As the industry navigates this turbulent period, stakeholders must learn from Byju’s missteps and implement robust risk management frameworks to ensure the long-term viability of the edtech ecosystem, as they strive to build sustainable, transparent, and accountable businesses that can weather the storms of the future.
