Byju’s has had a nightmarish last few quarters, and its troubles still seem to be mounting.
The Enforcement Directorate has issued a lookout notice against Byju’s founder and CEO Byju Raveendran. The ED has asked the Bureau of Immigration to ensure that Raveendran doesn’t leave the country. The notice has been issued over alleged contraventions of FEMA (Foreign Exchange Management Act).
The ED has been investigating Byju’s for over a year. In April 2023, ED had raided Byju’s offices and the Raveendran’s home, and had reportedly seized incriminating documents. In November 2023, the ED had issued a show-cause notice to Byju’s to the tune of Rs. 9,362 crore. “ED had initiated investigation on the basis of various complaints regarding the foreign investment received by the company viz. M/s Think and Learn Private Limited and the business conduct of the company. The company was also stated to have made significant foreign remittances outside India and investments abroad which were allegedly in contravention of provisions of FEMA, 1999 and caused loss of revenue to the Government of India,” ED’s press release had then said.
The ED has now gone ahead and issued a lookout notice against Byju Raveendran. This notice will likely prevent Raveendran from leaving the country. The notice also indicates that in ED’s assessment, Raveendran could be a flight risk.
This is a fresh blow for Byju Raveendran, who has seen his firm lurch from one crisis to another over the last couple of years. Byju’s had been flying high during the pandemic — the lockdowns had caused investors to pump into into the company, and Byju’s saw its valuation soar. But even as it was snapping up companies both in India and abroad, cracks had begun to appear. Byju’s had delayed filing its FY21 financial results for so long that even the Indian government commented on the issue. The results hadn’t made for pretty reading — Byju’s had lost Rs. 4,588 crore in FY 21 — and Byju’s had then proceeded to lay off thousands of employees. Around this time, questions had been raised in Indian parliament about Byjus’ alleged mis-selling of courses to economically vulnerable parents, and even the country’s child rights body had summoned CEO Byju Raveendran for questioning.
But things kept getting worse — not long after, the Enforcement Directorate had raided CEO Byju Raveendran’s home, and seized incriminating documents over violation of foreign exchange laws. Since then, Byju’s has seen its valuation marked down by several investors, and the company had tried to restructure its loan obligations. Byju’s had then been sued by its lenders, but it had gone on to sue them back and refused to pay back its loans amounting to $1.2 billion. Not long after, 3 of Byju’s board members had resigned in unison over concerns over its corporate governance , and a day later, its auditor, Deloitte, had also resigned. The ED had also issued the company a show-cause notice for contravening FEMA guidelines to the tune of Rs. 9,000 crore, and the company had been taken to NCLT court by BCCI over missed payments of its team India sponsorship which it had eventually transferred to Dream11. Earlier this year, Byju’s had been forced to create a rights issue at a valuation of just $225 million, down 99 percent from its peak.
And things appear to have got a lot more serious, with an ED lookout notice issued against Raveendran. Raveendran isn’t the only startup founder who’s had a lookout notice issued against them in recent times — last year, a lookout notice had been issued against former BharatPe CEO Ashneer Grover after he’d been accused of embezzling money from his own company, and he’d been stopped from leaving the country at the airport. This isn’t the best look for the Indian startup ecosystem — thus far, economic offenders who’d fled India were businessmen like Vijay Mallaya, Nirav Modi and Mehul Choksi. It appears that startup founders too are now being painted with the same brush.