BENGALURU – Byju’s, the world’s most valuable edtech start-up, was raided at the weekend by India’s financial crimes investigator and accused of foreign exchange violations, adding to the firm’s other challenges such as charges of unethical marketing.
The company, founded in 2011, has also had to let go of thousands of staff in a bid to rein in losses.
On April 29, India’s Enforcement Directorate (ED), which investigates money laundering and violations of foreign exchange laws, conducted search-and-seizure actions in Bengaluru at two Byju’s offices and the residence of its founder, Mr Byju Raveendran.
An ED statement said the company, India’s biggest edtech firm, received 280 billion rupees (S$4.6 billion) in foreign investment from 2011 to 2023, of which it remitted 97.54 billion rupees to other countries in the name of overseas investments.
The ED has not defined the wrongdoing, except to say that the company “has not prepared its financial statements since 2020-21 and has not got the accounts audited, which is mandatory. Therefore, the genuineness of the figures provided by the company is being cross-examined from the banks”.
The agency added that the raid was conducted on the basis of “various complaints” it had received from individuals. It noted that Mr Raveendran was summoned several times but remains “evasive and never appeared” before the ED.
A Byju’s spokesman said later that day that the ED action was a “routine inquiry”.
The spokesman added that the company is committed to upholding the highest standards of compliance and ethics, and said that it will ensure that the authorities have all the information they need, and that it is confident the matter will be resolved satisfactorily.
Mr Raveendran and his wife Divya Gokulnath founded Byju’s in 2011. The tutoring app offers lessons to students from the fourth to 12th grades, and also trains those taking competitive entrance exams for engineering, medical and management graduate programmes.
As at April 2023, the company claims to have over 150 million registered students.
In its lifetime, Byju’s has raised around US$5 billion (S$6.7 billion) in funding. As at June 2022, it had spent over US$3 billion on acquiring smaller local edtech companies such as WhiteHatJr, gradeup and Aakash.
Today, Byju’s is the world’s most valued start-up at US$22 billion, with investors that include Chan Zuckerberg Initiative and Sequoia Capital.
It is also one of the Indian national cricket team’s most visible sponsors, and counts football star Lionel Messi and Bollywood star Shah Rukh Khan among its brand ambassadors.
But the fast-growing edtech giant faces complex financial troubles, evident in the recent layoffs of thousands of employees and delayed filing of financial statements.
Byju’s filed audited statements for the fiscal year 2020-21 after a delay of 18 months, after the Ministry of Corporate Affairs issued notices to the company. But it has yet to announce results for the year ended March 31, 2022.
Its earnings during the financial year 2020-21 fell to 242 million rupees, from 251 million rupees in 2019-20. It incurred a loss of 458.8 million rupees in 2020-21 – 19 times more than the 23.2 million rupee loss in 2019-20.
In 2022, Byju’s announced it was one of the sponsors for the Fifa World Cup, but it also launched a cost-cutting drive to stem losses by laying off around 4,000 employees.
After India’s apex child rights body summoned Mr Raveendran in December 2022 over allegations that Byju’s was indulging in predatory practices by forcing parents and children to buy its courses, the company introduced a new sales model and an affordability test for potential customers in January.
It has also been renegotiating terms with its creditors, after having defaulted on certain conditions. In April, it offered to increase the rate of interest on a loan of US$1.2 billion it had raised from investors in 2021, one of the largest for Indian start-ups.
In the last 18 months, several other Indian start-ups have also come under scrutiny for alleged misconduct and fraud.
The income tax department found that founders of digital payments platform BharatPe had used shell companies and round-tripping to evade taxes and launder money. Zilingo, an e-commerce platform founded in 2015 to digitise South-east Asia’s fashion supply chain, saw employees leave and its valuation crash after the authorities found over-reported revenues and fabricated invoices.
