Ed-tech giant Byju’s, once a shining star in the education technology sector, is now grappling with severe financial difficulties. Byju Raveendran, the founder and namesake of the company, has seen his fortune deteriorate dramatically over the past year. Previously listed on the Forbes Billionaires list with a net worth of Rs 17,545 crore, Raveendran’s net worth has now plummeted to zero, a casualty of the profound challenges his company is facing. Byju’s, which once boasted a valuation of $22 billion, now sees its value reduced to a mere fraction of that.
The company’s downturn has been swift and significant, as in less than a year, Byju Raveendran’s wealth has entirely evaporated. In an effort to support his employees, he even went to the extent of mortgaging his house to ensure salaries were paid. This drastic action underscores the severity of the financial crisis impacting both the founder and the organization he built.
Byju’s predicament has also drawn the attention of the National Company Law Tribunal (NCLT), which intervened to maintain the status quo concerning the company’s shareholding structure. The tribunal’s directive was issued on June 12, following attempts by Byju’s to proceed with a rights issue, a move designed to raise additional capital by offering new shares to existing shareholders. The NCLT’s intervention necessitated Byju’s to submit detailed records of its shareholders, both before and after the equity allotments on March 2.
Investor discontent has been palpable, as a consortium comprising Prosus, General Atlantic, Sofina, and Peak XV, with support from other stakeholders including Tiger and Owl Ventures, approached the tribunal. Their grievance centered on the legitimacy and timing of Byju’s second rights issue, which was initiated on May 11 and was to conclude on June 13.
According to the tribunal’s order, Byju’s must halt the current rights issue process until the main petition filed by the investors is resolved.
. Furthermore, any funds collected since the opening of this second rights issue are mandated to be kept in a separate account, remaining untouched until the petition’s disposition.
The company initially claimed to have secured full commitment for a $200 million rights issue in February, but failed to raise this amount in reality. Consequently, Byju’s initiated a second-round fundraising effort seeking an additional $100 million. Investor sources have cast doubt on the company’s ability to even attain the $100 million target, suggesting that the company’s narrative of financial stability might be misleading.
When approached for comments, Byju’s remained unresponsive. However, sources familiar with the company’s internal workings contended that the ongoing rights issue was not an entirely new fundraising effort but rather a continuation of the February attempt. This explanation suggests that subscription commitments were not met fully because some investors opted out, leading to an incomplete first-round subscription.
Byju’s claims that the current rights issue is a supplementary effort, allowing existing shareholders to fill any gaps left from the earlier subscription on a super pro-rata basis. In simpler terms, shareholders who participated partially can increase their shareholdings by covering the unsubscribed portions.
The NCLT is set to hear the complete matter on July 4, making it clear that the ongoing financial and legal challenges at Byju’s are far from resolved. The company’s rapid decline in valuation and the founder’s dramatic fall from billionaire status are stark reminders of the volatility and risks inherent in the fast-paced tech industry.
The broader education technology sector is closely watching Byju’s struggle to regain stability, as its fortunes impact investor sentiments and market dynamics across the industry. Observers hope that strategic interventions and potential restructuring might offer a lifeline to the ailing company, but as of now, the future remains uncertain for Byju Raveendran and the iconic ed-tech firm he established.
