BYJU’S, one of the most successful startups in India at one point, and its chief promoter Byju Raveendran have been thrown into a stir after the Enforcement Directorate (ED) issued a notice for violating foreign exchange laws. The ED has alleged that Byju’s has swindled Rs 9,362 crore in foreign investment between 2011 and 2022.
The ED alleged that the notice was issued by the ED to produce the documents related to what was imported against the remittance amount, but the registered company of the Byju’s brand, ‘Think and Learning Pvt Ltd’, failed to produce the documents. Apart from this, the company has not presented the documents regarding the exports made abroad. The company has also been issued a notice for not producing the documents related to the Foreign Direct Investment (FDI) received by it.
Byju’s had been on ED’s radar for a long time. The ED also raided three premises of Byju’s in the month of April. At that time, it was said that the company received Rs 28,000 crore as FDI between 2011 and 2013, but the company did not give any account of it. The company also failed to submit financial reports and violated several provisions of the Foreign Exchange Management Act (FEMA).
The company has remitted Rs 9754 crores to various foreign institutions. This amount is claimed to be sent as ‘Overseas Direct Investment’ but no details are given as to where the investment was made. The investment which is made when an Indian company enters a joint venture with a foreign company or creates its own fully subsidiary company is called Overseas Direct Investment. Byju’s has declared Overseas Direct Investment in the name of expansion abroad but has not maintained accounts for it.
Apart from this, the company has shown that Rs 944 crore has been spent in the name of advertisement and marketing expenses abroad but has not produced any evidence or documents regarding the same. ED feels that the company has done many messy scams due to this.
At that time, ED issued a show cause notice to the company and asked it to explain all matters, but even after seven months, no explanation was given, finally ED has issued a notice alleging a scam of Rs.9362 crores. At the time of the raid in April itself, Byju’s promoter Byju Raveendran had promised to make all the rules related to foreign exchange, but nothing happened.
Crossing its limits in financial regularity, the company has just announced the results for the financial year 2021-22. Despite repeated notices, the company did not declare the results and even after a year’s delay the results are declared now. It is not decided when the results of the financial year 2022-23 will be declared.
The court will decide how true the stories of Byju’s being involved in the financial scam are, but looking at the current situation, there is every possibility that the last camp of India’s once most promising Manati company has come. Currently the financial problems of the company are increasing and the company is laying off the employees in a big way and these employees are not being given their salary including full and final settlement money including EPF, Gratuity etc. The company has a loan of about 1 lakh crore rupees. It is doubtful whether Byju’s will recover again as it is not decided how the loan will be repaid.
What is worth pondering is why Byju’s, whose market value was once around two lakh crore rupees, has become like this. It is not that the promoters including Byju Raveendran have blown money on Lavish lifestyle like Vijay Mallya or Mehul Chokshi but the company is sunk and so incompetent management is obviously responsible. According to some experts, Byju Raveendran considered the success achieved during the Corona period to be permanent and spent on expansion, but this is not perfectly true.
ED’s allegations against Byju’s are not from the Corona period but from 2011. Due to this, chances are seen for Byju to be involved in the dirty business of laundering black money or hawala. There is also a possibility that Raveendran started Byju’s in 2011 on the cue of such elements. ED’s investigation will reveal what is true, but now Byju’s is under suspicion.
One of the reasons why Byju’s is in the news is that Byju’s was once one of the most successful startup companies in the country. Byju’s was said to have started a new revolution in India by thinking of starting an ed-tech company by combining education and technology. By making Byju Ravindra a role model for youngsters, he was given awards including Young Entrepreneur of the Year.
All this seems to have come to naught in the wake of the allegations against Byju’s. Now all the successful startups will be looked at with suspicion and it will affect startups in India. Investors will think a hundred times before investing in genuine startups. India has crores of students so the ed-tech business can be huge but the failure of Byju’s will also hit the sector as new good players will be reluctant to come in.
Kalpesh has a rich experience of 10 years of handling and leading various projects. He is an independent freelancer associated with Academic Institutions and Social Organizations. Prior to achieving job independence, he was working with Dr. Reddy’s Foundation (DRF) as Area Head. He can be mailed at kalpeshsavan@gmail.com
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