Byju’s lenders submit insolvency filing after missed payment

By Anto Antony

Lenders to Byju’s Alpha filed an insolvency petition after the Indian education startup missed payment on a $1.2 billion loan.

The move, announced by creditors in an emailed statement on Thursday, is the latest step in the fight between the startup founded by Byju Raveendran, once valued at $22 billion, and its creditors. Lenders have already taken control of its units in Singapore, while the company is challenging their moves in the US.

The insolvency petition comes as the beleaguered firm is seeking to raise more than $100 million from existing investors through a fresh issuance of shares next month, at a price that values the firm at less than $2 billion, Bloomberg reported earlier this week. The company, which has been battling a cash crunch for several months, will use the proceeds to pay off vendors and stabilize the business.

“This is a message to all startups - beware of debt,” said Srinath Sridharan, a Mumbai-based policy researcher & corporate advisor. “Equity holders can write off their share value, but debtors have recourse” via the insolvency and bankruptcy code.

Raveendran attracted capital from some of the biggest investors in the tech world, including Mark Zuckerberg’s Chan Zuckerberg Initiative, Silver Lake Management and Naspers Ltd.

Mounting Losses

But the online tutoring firm lost money after a pandemic-era boom in business dried up. Raveendran pledged his own home, as well as those owned by family members, to raise money to pay employees, Bloomberg reported in December.

“The myriad issues facing BYJU’s are entirely self-inflicted,” the lenders’ group said in an email Thursday. “For months, we sought to avoid this exact situation.”

“It is our belief now that Byju’s management has no intention or ability of honoring its obligations under the term loans,” the group said. “That said, we are hopeful that India’s corporate insolvency resolution process will help stabilise Think & Learn and result in implementing a resolution plan that accounts for the interests of all stakeholders.”

The filing was made this week to a National Company Law Tribunal in India, people familiar with the matter said, asking not to be identified as the document isn’t public yet. Moneycontrol reported the insolvency petition filing earlier.

Proceedings ‘Baseless’

“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,” Byju’s said in an emailed response. “Hence, any proceedings by lenders before NCLT are premature and baseless.”

Byju’s Alpha is a holding company that the lenders need to control to protect their rights, a creditors’ lawyer told a Delaware Court earlier this year. The creditors accused the company of hiding $533 million in an obscure hedge fund, according to court filings.