BYJU’S’ lenders file insolvency proceedings against the firm

Edtech firm BYJU’S’ lenders, who collectively own more than 85% of its $1.2-billion term loan B (TLB), have filed an insolvency petition against the firm.

The bankruptcy petition against the edtech firm was filed earlier this week with the National Company Law Tribunal (NCLT) in Bengaluru, according to a Moneycontrol report.

The Bengaluru-based company, however, said that any proceedings by lenders before NCLT are premature and baseless. “As we have stated before, the validity of lenders’ actions, including acceleration of the term loan, is pending and under challenge in several proceedings, including before the New York Supreme Court,” a BYJU’S spokesperson explained in a statement.

For over a year, BYJU'S and its lenders have been embroiled in a conflict, with multiple rounds of negotiations to amend the TLB agreement. Both parties were expected to finalise a term loan amendment before August 3, 2023.

In July, the steering committee of ad hoc term loan lenders had said in a statement that the successful execution of the amendment would immediately solve the loan’s acceleration and end all open litigation while avoiding further enforcement actions.

“Surprisingly, the acceleration and consequent actions by the lenders appear to be based, in part, on the failure of WhiteHat Education Technology Pvt. Ltd, a wholly-owned subsidiary of Think & Learn, to guarantee the term loan. This is despite the fact that provision of such guarantee would contravene extant RBI regulations,” the spokesperson said, adding that proceedings are on foot before the Delaware appellate courts on this issue.

BYJU’S Alpha, a wholly-owned subsidiary of the edtech unicorn, raised the loan in November 2021.

Last September, YourStory reported that BYJU’S was exploring the sale of two of its assets—Epic and Great Learning—to generate at least $800 million. The intended purpose of this sale is to repay the debt tied to $1.2 billion (TLB).

“...BYJU’S has been in regular touch with the lenders and has also involved them in the sales process of some of its prized US subsidiaries to settle matters,” the spokesperson noted.

The statement added that the timing of these proceedings is conspicuous as it coincides with the commencement of a rights issue by the parent company of BYJU’S.

BYJU’S India Chief Financial Officer Nitin Golani recently said that the company plans a rights issue in February to raise funds at a lower valuation to ease its financial challenges.

“The initiation of this legal process does not reflect the true financial standing of our company, nor does it accurately represent our ability to meet our obligations. We firmly maintain that we are a resilient, viable entity that is incrementally charting a path towards sustainable growth,” the BYJU’S spokesperson elaborated.

Earlier this week, the edtech firm submitted its financial results for the fiscal year (FY) 2021-22 to the Ministry of Corporate Affairs. It reported a consolidated loss of Rs 8,245 crore in FY22, up 80.6% from Rs 4,564 crore recorded in the earlier fiscal.

Meanwhile, its operating revenue rose 120%, touching Rs 5,014.6 crore in FY22 compared with Rs 2,280.3 crore in FY21. Its total expenses surged 94.5% to Rs 13,668.5 crore in FY22, compared with Rs 7,027.5 crore in FY21.

BYJU’S' challenges

In a separate development, a second plea was filed against BYJU’S at the NCLT Bengaluru bench by Teleperfomance Business Services to recover its dues from the edtech firm. 

Earlier in November, NCLT issued a notice to BYJU’S parent, Think & Learn Private Limited, in response to a petition filed by the Board of Control for Cricket in India, claiming dues of Rs 158 crore under Section 9 of the Insolvency and Bankruptcy Code, 2016.

Last week, the edtech firm reportedly notified the NCLT Bengaluru bench that it has taken the payment dispute with BCCI to an arbitrator.

BYJU’S, which rapidly grew through strategic acquisitions, has encountered significant challenges post the pandemic-led edtech boom. The edtech firm has spent over $3.5 billion on 19 acquisitions, as per Tracxn. It has invested in multiple sectors such as K-12 (kindergarten to 12th grade), continued learning, test preparation tech, and more.

In 2021, BYJU’S acquired Aakash for a mammoth $1 billion, closing the world’s largest edtech acquisition by a venture capital-backed company.

The test-pre unit was rendered debt-free last year after Ranjan Pai–the Chairman of Manipal Education and Medical Group bought Rs 1,400 crore debt in Aakash to help the troubled edtech firm pay off a loan taken from US-based lender Davidson Kempner Capital Management.

Pai is reportedly set to become the largest shareholder in Aakash with a 40% stake.

The Aakash board has approved the conversion into equity of the $300 million Pai invested in the last year, The Economic Times reported.