Adding to the company's existing legal and financial challenges, foreign lenders to Indian education technology star BYJU have filed an insolvency petition against the company in the National Company Law Tribunal (NCLT). The bankruptcy petition was reportedly filed in the Bengaluru court earlier this week. The company's foreign lenders have extended over 85% of its total $1.2 billion Term B Loan.
BYJU called the lenders' action “premature and unfounded” and questioned the timing of the proceedings, saying it coincided with the start of a rights issue by its parent company Think & Learn.
Over the past two years, the homegrown education technology company has struggled with problems on all fronts — from crash crises to mass layoffs to FEMA (Foreign Exchange Management Act) rule violations. The latest development also comes just days after the company warned about its ability to “continue as a business” amid mounting losses and legal issues.
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Disclosing its FY22 performance, the company said accumulated losses and uncertainty over the outcome of litigation related to the $1.2 billion Term Loan B Facility indicate “material uncertainty.” This “could raise significant doubts about the company’s ability to continue as a going concern,” BYJU said.
Regarding the current actions of the lenders, the company explains that the matter is pending in court. “As we have previously noted, the validity of the lenders' lawsuits, including the acceleration of the term loan, are pending and being challenged in multiple proceedings, including in the New York Supreme Court. Therefore, any appeals by the lenders before the NCLT are premature and baseless,” said a statement issued by BYJU today.
The company adds that the current actions by its lenders appear to be based in part on the failure of Whitehat Education Technology Pvt Ltd, a wholly owned subsidiary of parent company Think & Learn, to guarantee the term loan. “This is despite the fact that providing such a guarantee would be in violation of the prevailing RBI regulations. Proceedings on this issue are currently ongoing in the Delaware appellate courts,” BYJU added.
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Notably, in December 2023, reports said that the education technology titan was considering settling the entire $1.2 billion Term B loan to its lenders through the sale of its foreign acquisitions Epic and Great Learning.
The lenders had also previously made “unsuccessful attempts” to interfere with BYJU’s rights to deal with the capital provided under the loan agreement, the company added. The Delaware Chancery Court “refused” to allow the lenders to 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,” which, it said, would take those steps to force BYJU's “to comply with their to give in to extortionate demands.”
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BYJU assures that it is in regular contact with the lenders and has even involved them in the sale process of “some of its valued US subsidiaries to settle the matter”. The online teacher says the legal process does not reflect his “true financial standing” nor does it accurately reflect his “ability to meet his obligations.”
Byju Raveendran-led Think & Learn Pvt, the parent company of BYJU, reported a sharp rise in losses to the tune of ₹8,245 crore for the financial year 2021-22, driven by mounting losses at its White Hat Jr and OSMO units. However, revenue increased significantly during the year to ₹5,298.43 crore as against ₹2,428.39 crore in FY21.
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