Why BYJU’S founder Raveendran cannot leave the country

Byju Raveendran has been barred from leaving India.

The Enforcement Directorate has upgraded its Look out Circular (LOC) against the 43-year-old BYJU’S founder.

The development comes a day after the Karnataka High Court refused to stay an emergency shareholder meeting that seeks to oust Raveendran and his family from the company bearing his name.

The company has faced a string of setbacks including lay-offs and legal cases.

In January, BlackRock slashed Byju’s valuation, which has been at $22 billion in 2022, by 95% to $1 billion.

Last year, Raveendran even reportedly mortgaged his homes to pay his staff.

Let’s take look at Raveendran’s many woes:

ED’s lookout notice

The Economic Times reported that the ED asked the Bureau of Immigration (BOI) to issue an LOC against Raveendran to stop him leaving India.

This comes after the BOI issued an LOC ‘on intimation’ against Raveendran over a year-and-a-half ago.

According to NDTV, the previous notice meant that ED officials would be informed about any foreign trip Raveendran makes.

That LOC was done at the behest of the ED’s Kochi office.

However, the investigation was later transferred to the ED’s Bengaluru office, according to the Economic Times.

Sources said the old LC was revised sometime back in light of investors’ concerns and ongoing adjudication of a FEMA contravention case against Raveendran and some others.

Under the new LC, it will be the decision of the IO to either totally stop his foreign travel or allow him to do so after asking some questions and getting assurances, the sources said. The LC in operation till now against Raveendran only stipulated the immigration authorities to inform the ED about his entry and exit from the country.

The agency, in November 2023 sent a foreign exchange violation show cause notice of more than Rs 9,300 crore against BYJU’S and Raveendran.

The company and and its founder have contravened the provisions of FEMA by failing to submit documents of imports, realise proceeds of exports made outside India, and so on, the law enforcement agency said.

“…By failing to submit documents of imports against advance remittances made outside India, by failing to realize proceeds of exports made outside India, by delayed filing of documents against the Foreign Direct Investment (FDI) received into the company, by failing to file documents against the remittances made by the company outside India and by failing to allot shares against FDI received into the company,” the ED added.

Shareholder meeting tomorrow

Meanwhile, Raveendran is staring at a revolt from some shareholders.

The meeting called by select investors of Think and Learn Pvt Ltd — the owner of BYJU’S — to oust Raveendran and his family from the leadership in the edtech firm is set go ahead tomorrow.

This after the Karnataka High Court refused to issue a stay on the emergency meeting.

The shareholders have alleged irregularities in the running of the edtech firm and demanded a change in leadership.

According to NDTV Profit, the board comprises Raveendran, his brother wife Divya Gokulnath and his brother, Riju Raveendran.

While the company had approached the Karnataka High Court seeking a stay on the EGM the court refused.

However, it said that any resolution passed at the EGM on Friday cannot be implemented before the next court hearing.

Sources told Moneycontrol the next court hearing will be held on 13 March.

“It is further submitted that the conditions for convening the Extraordinary General Meeting (EGM) are not complied and no notice is issued as contemplated under Section 100 (3) of the Companies Act 2013,” the court order said.

It further passed an interim order that “the decision, if any taken by the shareholders of the petitioner company in the EGM scheduled on February 23, 2024, shall not be given effect to, till the next date of hearing,” the order said.

BYJU’S had filed the petition before the court arguing that certain investors, including General Atlantic, Chan Zuckerberg Initiative, MIH EdTech Investments, Own Ventures, Peak XV Partners (formerly Sequoia Capital India & SEA), SCI Investments, SCHF PV Mauritius, Sands Capital Global Innovation Fund, Sofina, and T Rowe Price Associates, had violated the Articles of Association (AoA), the Shareholders’ Agreement (SHA), and the Companies Act, 2013 by calling for an EGM on February 23, 2024.

“The court’s decision to grant immediate relief to BYJU’S by invalidating the resolutions passed by the EGM, underscores its recognition of the need to protect BYJU’S best interests, and uphold the principles of corporate governance. The ruling ensures that the company can continue its operations with stability and focus, safeguarding the interests of all stakeholders,” BYJU’S statement said.

But investor sources told PTI it is incorrect to say the court has invalidated the resolutions.

A source said the EGM will go ahead for a vote to remove Byju as the CEO.

“EGM to continue. Court order does not prohibit it in any way. Majority of investors are expected to vote in favour of removal of CEO,” the source said.

Raveendran in a letter Wednesday called on shareholders to come together and participate in the $200 million rights issue floated by the company.

He said while taking part in the rights issue “may seem like a Hobson’s choice” this is the only viable option in front of us today to prevent permanent value erosion.

“A few vested interests are misrepresenting our relationship as adversarial. Let me be unequivocal in stating that such narratives could not be further from the truth,” he wrote as per NDTV Profit.

Raveendran claimed that the rights issue was fully subscribed.

He also vowed to restructure the board by appointing two non-executive directors as well as appointing a third-party agency to monitor how newly-raised funds are spent.

He also remained bullish about the company’s future.

“The negativity has affected perception of the brand, but consumer belief continues to grow. We are launching Byjus Wiz, an AI-powered tool designed to be a true study companion for students. Our AI model, trained with our proprietary data generated over the last 8 years and integrated with the Geogebra’s math engine, delivers an impressive 99% accuracy in answers, surpassing any other model currently available globally. Brand BYJU’S is not just alive, it is also kicking,” he wrote as per Economic Times.

Lenders abroad

BYJU’S is also battling lenders from abroad over a $1.2 billion loan.

As per The Times of India, BYJU’S borrowed the money in 2021 to pay for its overseas expansions.

In June 2023, BYJU’s sued the lenders in New York after missing a a $40 million quarterly interest payment on the loan.

The lenders in January filed insolvency proceedings against the firm. The plea was filed in front of the Bengaluru bench of the National Company Law Tribunal (NCLT), as per The Times of India.

The lenders accused BYJU’S of ‘failing to honour its obligations under the terms of the loan.’

“The myriad issues facing Byju’s are entirely self-inflicted. For months, we sought to avoid this exact situation, repeatedly attempting to engage constructively with Byju’s management and other stakeholders, and providing them with multiple paths to reach a mutually agreeable resolution, even after the Delaware court confirmed the validity of Byju’s defaults. It is our belief now that Byju’s management has no intention or ability of honouring its obligations under the term loans,” the lenders said.

The lenders said their move to file corporate insolvency proceedings against Think and Learn was taken after 16 months of “good faith efforts” on behalf of the company to restructure its loans.

The petition was filed by GLAS Trust Co, the agent for Byju’s term loans.

BJYU’S responded by calling the move ‘premature and baseless.’

“As we have stated before, the validity of lenders’ actions, including acceleration of the term loan, is pending and under challenge in several proceedings, including before the New York Supreme Court. Hence, any proceedings by lenders before NCLT are premature and baseless,” Byju’s said.

BCCI case

BYJU’S is also facing legal action from the richest and and arguably most powerful sports body in India.

The Board of Control for Cricket in India (BCCI) had filed a petition against the company claiming dues of Rs 158 crore as an operational creditor under section 9 of the Insolvency & Bankruptcy Code 2016.

The company in 2019 had taken over sponsorship of the Indian cricket team from  mobile manufacturer Oppo.

The NCLT in December  issued notice to Think & Learn Pvt Ltd, which provides online educational services under the brand name of Byju’s, over a petition filed by the Board of Control for Cricket in India (BCCI).

Admitting BCCI’s plea, a two-member Bengaluru-based bench of the National Company Law Tribunal (NCLT) issued notice to Think & Learn.

The NCLT order further said, “two weeks is granted to the Respondent (Byju’s) to file a reply and one week thereafter is granted to the Applicant (BCCI) to file rejoinder, if any, after duly serving the copy on the other side.” The tribunal has directed to list the matter on December 22, 2023, for the next hearing in this matter.

During the proceedings, BCCI’s counsel informed NCLT that a general notice was issued to Byju’s through an e-mail dated 6 January , 2023, with a default amount of Rs 158 crore, excluding TDS.

The matter remains with the courts.

Despite Raveendran’s optimism, it seems he has a mountain – or several mountains – to climb.

With inputs from agencies