The Ministry of Corporate Affairs (MCA) confirmed that it is still investigating allegations of financial misconduct against Byju’s, an edtech firm.
This clarification came on June 26 following media reports wrongly claiming that the government had cleared Byju of financial fraud.
Earlier reports suggested the government had absolved the struggling online-education startup of wrongdoing.
Yet, the MCA countered these reports, emphasizing that investigations are ongoing and no conclusions have been drawn yet.
Byju’s Financial Misconduct Investigation
The Ministry of Corporate Affairs countered reports claiming it had cleared Byju of financial fraud, asserting that the investigation is ongoing.
In a statement, the ministry clarified that such reports are inaccurate and misleading. It emphasized that the proceedings initiated under the Companies Act, 2013, are still in progress, and no final conclusions should be drawn yet.
Once highly favored by investors, Byju has recently garnered attention for its dramatic decline. According to a research note from HSBC, the company, once valued at $22 billion, is now reported to be worth nothing.
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Byju’s Investigation Findings
Recent reports on the ministry’s investigation found that Byju did not misuse funds or manipulate accounts. However, there were governance issues within the company.
HSBC’s research note discounted the value of Prosus’ nearly 10% stake in Byju’s, which was once valued at $500 million. They now assign zero value to this stake due to ongoing legal challenges and financial constraints faced by Byju.
Byju is currently involved in several legal battles in India and abroad, including proceedings in the National Company Law Tribunal. Despite aiming to raise $200 million through a rights issue, the tribunal has restricted them from using these funds. The company is also in discussions for settlements with some creditors outside of court.
Byju’s Financial Challenges
Byju’s, a leading startup in India known for its educational technology, is currently facing significant financial challenges. Recently, its lenders in the United States took legal steps to initiate bankruptcy proceedings under Chapter 11 against three guarantors who guaranteed a substantial $1.2-billion loan.
This action followed an inspection ordered by India’s Ministry of Corporate Affairs due to delays in Byju’s financial reporting and the resignation of its auditor.
In response to its mounting financial pressures, Byju has begun the process of selling off two of its subsidiaries, Epic and Great Learning. These acquisitions were part of Byju’s ambitious expansion strategy during a period of rapid growth in 2021 when the company achieved a valuation of $22 billion.
However, since then, Byju’s valuation has declined, impacting its attempts to raise $200 million through a contentious rights issue.
Currently, Byju is burdened with debts exceeding $200 million in India and an additional $200-250 million in the United States. Moreover, the company is obligated to make regular quarterly payments to bondholders. Byju operates under the legal entity Think & Learn Pvt Ltd, headquartered in Bengaluru, India.
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Byju’s Financial Misconduct Investigation FAQs
Q.1. What are Byju’s current financial challenges?
Ans. Byju faces debts exceeding $200 million in India and additional obligations in the US, alongside legal battles and declining valuation.
Q.2. Is Byju involved in any ongoing investigations?
Ans. Yes, India’s Ministry of Corporate Affairs is investigating allegations of financial misconduct.
Q.3. Has Byju’s been cleared of financial fraud allegations?
Ans. No, recent reports clarified that investigations are ongoing, and no conclusions have been reached yet.
Q.4. Why is Byju’s selling off subsidiaries like Epic and Great Learning?
Ans. To address financial pressures and repay debts, Byju is liquidating assets acquired during a period of rapid expansion.
Q.5. What is the current valuation of Byju’s?
Ans. Byju’s, once valued at $22 billion, has seen its worth decline significantly amid financial challenges and legal issues.
