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Compounding the woes of edtech giant Byju’s, the Enforcement Directorate has banned its founder Byju Raveendran from traveling outside the country. The central agency has issued a vigilance circular against the 43-year-old businessman. Earlier, the ED had issued an “over insinuation” vigilance circular, which meant that the immigration authorities would inform concerned officials about any foreign travel by Raveendran, but now he may be stopped from leaving the country.
The edtech company, once valued at more than $20 billion and a poster child for India’s startup ecosystem, suffered massive losses last year and a drop of around 90 per cent in its valuation. It has lost key investors and its auditor Deloitte has resigned. Byju’s is also embroiled in a legal fight with lenders in the United States over a $1.2 billion loan.
Raveendran, a former engineer who witnessed a meteoric rise before the current crisis, has been criticized for the edtech company’s declining fortunes.
A group of shareholders had requested an extraordinary general meeting (EGM) tomorrow to remove Raveendran and appoint a new board. But the founder of the edtech company got some relief thanks to a Karnataka High Court order that said any decision taken in the meeting would be invalid until the next hearing.
Byju has said that the meeting was “merely a smokescreen designed to disrupt the management, control and functioning of the company”.
Investor sources told the AFP news agency that the court had not prohibited the holding of the general meeting. They said the meeting would be held and investors would continue to push for Raveendran’s removal as CEO.
A company spokesperson said: “This Extraordinary General Meeting is procedurally invalid, contractually contravenes our Articles of Association and Shareholders’ Agreement, and legally falls on the wrong side of the Companies Act 2013. Byju Raveendran or any other member of the Board will not attend this invalid Extraordinary General Assembly. “This means that the Extraordinary General Assembly, if still convened, will not have the required quorum and will not be able to proceed to discuss or vote on the agenda. As custodians of BYJU’S, it is the responsibility of the founders to respect the procedures established by law and protect the integrity of the company.”
Byju’s key investors include technology investment giant Prosus, US growth equity firm General Atlantic and the Chan Zuckerberg Initiative, a philanthropic company founded by Facebook chief Mark Zuckerberg and his wife Priscilla Chan. Representatives of Prosus and the Chan Zuckerberg Initiative resigned from Byju’s board of directors last year.
Byju’s rapid rise before his crushing fall
In 2006, Byju Raveendran formally launched classes for MBA aspirants preparing for the CAT exam. The educational technology company gradually expanded to university students and then school students. In 2015, Byju’s Learning App was launched. Over the next four years, it became the country’s first edtech unicorn. The Covid pandemic led to rapid expansion of Byju’s network as schools were closed and school teaching moved online.
Then the problems began. Accusations of a toxic work atmosphere and aggressive marketing that harassed parents began to surface. Last year, Prosus slashed Byju’s valuation by 75 percent, leading to layoffs and accusations of financial mismanagement. In its heyday, the edtech company had spent heavily on sponsorship. It had sponsored the Indian cricket team, the Football World Cup and had signed football legend Lionel Messi as a global ambassador. Growth slowed after schools reopened and Byju’s suffered huge losses. Late last year, Byju Raveendran had to mortgage personal properties to get a loan to pay staff salaries.
Byju’s foreign investment has been scrutinized by the Enforcement Directorate. Ahead of the watchdog circular against its founder, the Education Department issued notices to Byju’s parent company Think & Learn over alleged violations worth over Rs 9,362 crore under the Foreign Exchange Management Act.