India’s Top Court Clears Byju’s Insolvency

A tribunal ruling that halted Byju’s insolvency proceedings has been suspended by India’s highest court, a victory for U.S. creditors attempting to recover $1 billion from the once-famous edtech startup

On Wednesday, the Indian Supreme Court issued a stay on the National Company Law Appellate Tribunal’s recent sanction of a settlement between the Indian cricket board BCCI, which had halted the insolvency proceedings. The proceedings will now resume due to the Supreme Court’s order.

Cash-strapped Byju’s, once India’s most valuable startup with a $22 billion valuation, is currently facing its most recent crisis with the Wednesday ruling.

Insolvency proceedings were initiated by the Indian tribunal court last month after the startup failed to pay over $19 million to the BCCI, which holds significant sway in India as the formal body overseeing cricket, the most popular sport in the country. The startup’s troubles began two years ago but escalated last month.

The proceedings were averted by Byju’s when the CEO’s sibling, Riju Raveendran, agreed to pay the BCCI. An appeals tribunal subsequently quashed the insolvency case.

Glas Trust, a U.S.-based organization representing certain lenders to a company in Byju’s group, opposed the tribunal’s decision. Glas Trust contended that Riju Raveendran had utilized the lender’s capital to pay the BCCI.

Including a $1.2 billion Term B loan from a consortium of U.S. creditors, Byju’s raised over $2.5 billion between 2020 and 2021. After the global market was devastated by Russia’s invasion of Ukraine, the startup was forced to abruptly abandon its plans to go public in early 2022 at a valuation exceeding $40 billion.

Requests for comment were not promptly addressed by Byju’s.

For the past two years, the startup has been battling fires on virtually every front. It encountered substantial difficulties 2022 when it failed to meet revenue projections by more than 50% and missed financial reporting deadlines.

Top investors, such as Prosus and Peak XV, have alleged governance issues at the edtech firm and have even pursued legal action to remove founder Byju Raveendran and gain control over the firm. The firm has raised over $5 billion in equity and debt.

In protest, the startup’s auditor and board members abruptly resigned last year.

The conflict was further exacerbated when Byju reduced its valuation to $25 million to raise funding through a rights issue. This decision prompted a backlash from investors, including Prosus, Peak XV, Sofina, and the Chan Zuckerberg Initiative. They were prohibited from utilizing the capital it raised on the rights issue and endeavoring to raise a second rights issue.

Prosus and BlackRock have reduced the value of their Byju interests to zero.