Byju’s, the edtech startup and once India’s most valuable startup, is facing another setback as the Indian Supreme Court has put a hold on a tribunal ruling that had halted its insolvency proceedings. This ruling comes as a win for U.S. creditors who are seeking $1 billion from the company.
The troubles for Byju’s began when the Indian tribunal court initiated insolvency proceedings against the startup after it failed to pay a debt of over $19 million to the powerful cricket board. However, Byju’s was able to avoid insolvency when the CEO’s brother agreed to pay the debt. The appeals tribunal then dismissed the insolvency case, but the Supreme Court’s ruling has now put that decision on hold.
The U.S.-based Glas Trust, representing some U.S. lenders of a Byju’s group company, had opposed the halt on the insolvency process. They argued that Byju’s founder Byju Raveendran’s brother used the lender’s capital to pay the debt to the cricket board. This ongoing dispute has added to the legal and financial challenges faced by Byju’s.
Byju’s had raised significant funds, including a $1.2 billion loan from U.S. creditors, with a total funding of over $2.5 billion between 2020 and 2021. The startup had plans to go public in early 2022, targeting a valuation of over $40 billion. However, the market downturn caused by Russia’s invasion of Ukraine forced Byju’s to halt its IPO efforts.
This recent ruling by the Supreme Court further adds to the series of crises that Byju’s has been grappling with over the past two years. The company has faced governance issues and allegations from top investors like Prosus and Peak XV, who are seeking legal action to remove founder Byju Raveendran and gain control over the firm. Byju’s has also faced backlash from investors when it slashed its valuation for a rights issue.
The conflict between Byju’s and its investors intensified when the company was ordered to not use the capital it raised during the rights issue and to halt attempts at a second rights issue. This has led to major write-downs in the value of Byju’s stakes by investors like Prosus and BlackRock.
Overall, the hold on Byju’s insolvency proceedings by the Indian Supreme Court is a significant blow to the company’s financial stability and future prospects. The ongoing disputes and governance issues have created a challenging environment for Byju’s, hindering its growth and potential IPO plans. The outcome of these legal battles will greatly impact the future of one of India’s most prominent edtech startups.