BYJU's unable to pay salaries as rights issue funds inaccessible due to legal dispute with investors
In a letter to the staff, the edtech firm's founder Byju Raveendran said the amount raised through the rights issue is currently locked in a separate account.
founder Byju Raveendran on Saturday said the edtech company will not be able to pay salaries to employees as the recent funds raised through a rights issue are inaccessible due to a legal dispute with certain investors.
In a letter to staff, Raveendran said the rights issue, launched a month ago, has been successfully closed.
"This was supposed to be a happy correspondence. After all, we now have funds to meet our short-term needs and clear our liabilities. However, I regret to inform you that we will still be unable to process your salaries," he said.
In the letter, seen by PTI, Raveendran said the company is still striving to ensure that salaries are paid by March 10.
"We shall make these payments the moment we are permitted to do so as per law," he added.
Further, Raveendran said that, last month, the company faced challenges due to a lack of capital, and "now we are experiencing a delay despite having funds".
"Unfortunately, a select few (4 out of our 150 plus investors) have stooped to a heartless level, ensuring that we are unable to utilise the funds raised to pay your hard-earned salaries," Raveendran said.
"At their behest, the amount raised through the rights issue is currently locked in a separate account," he added.
Raveendran accused these select investors of having a callous disregard for the lives and livelihoods of others even though they had reaped substantial profits from investment in Byju's.
"It is an agonising reality that some of these investors have already reaped substantial profits - in fact, one of them has made a staggering eight times their initial investment in BYJU'S. And yet, their actions convey a callous disregard for our lives and livelihoods," he said in the letter.
Raveendran noted that he has fought fearlessly and tirelessly, "leaving no stone unturned" to find a way to honour the company's commitment to employees.
"Countless hours have been spent exploring every possible avenue, engaging our legal teams, and advocating for your rights. However, despite our best efforts, we are left with no option but to confront the heart-wrenching reality that we are temporarily unable to provide you with the financial support you deserve," he said.
Earlier this week, a company law court had asked the embattled edtech firm to consider extending the closing date of the $200 million rights issue, a request that the management had hinted it would not accept even as estranged investors flagged technicalities that prevented the closure of the issue on Wednesday.
In an interim order dated February 27, the National Company Law Tribunal, Bengaluru Bench said the funds received by the company in respect to the rights issue should be kept in a separate escrow account, and it should not be withdrawn till the disposal of the matter.
The next hearing has been listed for April 4.
The select group of investors in Byju's alleged that the edtech giant siphoned off $533 million in an obscure hedge fund in the United States and had sought a stay on a $200-million rights issue, calling it illegal and contrary to law.
In a high-voltage corporate drama that unfolded last month, BYJU's shareholders (prominent investors) voted unanimously for removing Founder-CEO Raveendran and his family from the board over alleged "mismanagement and failures" at what was once India's hottest tech startup, but the company hit back calling the voting done in the absence of founders as invalid and ineffective.
Sources close to the investors had earlier said more than 60% of the shareholders voted in favour of all the seven resolutions at the EGM, which included removing the current management, reconfiguration of the board, and a third-party forensic investigation into acquisitions done by the company.
The once-storied edtech startup, BYJU's rose to dizzying heights before it faced a series of setbacks.
While the return of students to physical classes post-pandemic and the recent acquisition of Aakash put BYJU's under a financial strain, the edtech firm, in the last one year, suffered other issues, including its auditor resigning, lenders beginning bankruptcy proceedings against a holding company, and a US lawsuit disputing the terms and repayment of a loan.
Edited by Swetha Kannan