Agencies
An Indian appeals tribunal stopped bankruptcy proceedings against troubled educational technology firm Byju on Friday after the company agreed to settle a $19-million unpaid sponsorship debt owed to the country’s powerful cricket board.
Byju’s, once one of India’s most hyped start-ups, rode a boom in demand for online learning products during the coronavirus pandemic but crashed hard after locked-down students returned to classrooms. The ruling provides some relief to the company, which was once valued at more than $20 billion but has since seen its valuation crash by an estimated 90 per cent.
A lower tribunal had last month pushed Byju’s into insolvency after the Board of Control for Cricket in India (BCCI) claimed an unpaid debt of 1.59 billion rupees ($19 million) for sponsoring the jerseys of the Indian team during international cricket matches. The firm’s co-founder Riju Ravindran has so far paid 500 million rupees of the total amount owed to the cricket overseer.
The partial payment prompted the sports body to agree to halt proceedings. Riju, who co-founded the company with his brother Byju Raveendran, is due to pay the balance of the sum owed on August 9.
The latest development marks a step toward resolving a disagreement which has clouded the prospects for a once-prominent startup. A lower bankruptcy court last month pushed Byju’s, officially Think & Learn Pvt., into insolvency after the startup couldn’t pay the BCCI. It also appointed a bankruptcy resolution professional, effectively taking away control of the company from Raveendran.
The order from the National Company Law Appellate Tribunal means Raveendran will regain control of the company. But the BCCI can revive its appeal in court should the firm fail to clear the dues on time. MZM Legal LLP advised Raveendran.
"Byju’s is now out of the insolvency process and BCCI gets its agreed dues,”said N.P.S. Chawla, joint managing partner at Aekom Legal. "If the insolvency had progressed, the cricket board would have received little to nothing as it is an operational creditor and not a financial creditor.”
Byju’s hailed the ruling as a "major victory” in a statement, adding the company’s teams would "continue to work hard to strengthen stakeholder confidence and reinforce their commitment to serve millions of students.”
"We have nurtured Byju’s for two decades, and we are committed to its mission of imparting high-quality education to students everywhere,”founder-CEO Raveendran said.
Still, Byju’s troubles are far from over. It remains embroiled in more than half a dozen bankruptcy cases in India and abroad. Some of its investors including Prosus NV are seeking to remove Raveendran as the company’s chief executive officer, and another court has barred him from using money from a share sale that took place at a discount. The cash crunch at Byju’s is so severe that several staff have not been paid in full for months, and the company is on the verge of being wound up.
A US judge on Wednesday ruled that Riju must pay $10,000 a day until he helps locate $533 million that Byju’s is accused of hiding from US lenders.
Founded by school teacher Raveendran, the firm was once a poster child for India’s burgeoning startup economy and was worth $22 billion at its peak.
Business surged during the coronavirus pandemic as classrooms turned virtual, making Raveendran a billionaire. A quick overseas expansion coincided with an expensive marketing blitz - it sponsored the India cricket team, while signing up Bollywood star Shah Rukh Khan and footballer Lionel Messi as brand ambassadors.
But as the pandemic subsided and schools re-opened, the startup’s cash pile shrank and it ran into legal problems in the US as well as its domestic market.
On a broader scale, Byju’s troubles and the struggles of other floundering internet firms such as Paytm are raising doubts about India’s ability to build up its private sector and compete with the US and China.
Venture investments in India’s young firms have dwindled, depriving the country of capital needed to diversify and grow the world’s fifth-largest economy. At Byju’s, the focus will now shift back to Raveendran’s efforts to keep the firm running, and its ability to pay its staff.
Byju’s valuation is estimated to have plummeted more than 90% from its peak. Major backer Prosus in June disclosed it had written down the value of its 9.6% stake in Byju’s to zero.
The firm was among investors attracted by the promise of a new style of education gaining users in the country of 1.4 billion people and abroad, along with Mark Zuckerberg’s Chan-Zuckerberg Initiative, Tiger Global Management and private equity giant Silver Lake Management.