Enforcement Directorate finds around Rs 9,000 crore FEMA violation by Byju’s, issues show-cause notice

The Enforcement Directorate (ED) has issued a show-cause notice to edtech major Byju's, alleging Foreign Exchange Management Act (FEMA) violations amounting to Rs 9,000 crore, a news report said on Tuesday.

The show-cause notice has been issued against Byju Raveendaran, founder of Byju's, and Think and Learn Pvt Ltd, the Economic Times reported.  

On its part, Byju's on Tuesday denied receiving any notice. The company has said in a statement: "Byju’s unequivocally denies media reports that insinuate it has received a notice from the Enforcement Department. The company has not received any such communication from the Enforcement Department.”

 

In April this year, ED conducted searches at three premises in Karnataka’s Bengaluru in connection with a case lodged against Raveendaran and his company ‘Think & Learn Private Limited’ under the provisions of the FEMA.

During the search and seizure action, various incriminating documents and digital data were seized, ED officials said.

The company has received foreign direct investment of approximately Rs 28,000 crore from 2011 to 2023 and remitted about Rs 9,754 crore to various foreign jurisdictions during the same period in the name of overseas direct investment, ED officials said.

At that time, ED officials said the company had booked around Rs 944 crore in the name of advertisement and marketing expenses including the amount remitted to foreign jurisdiction. 

Later, a company spokesperson negated the claims and said that the ED visit was related to a routine inquiry under FEMA, and there have been no violations under FEMA by the company. 

Byju's crises

The embattled edtech company has been facing a string of crises. The embattled edtech company is dealing with a cash crunch and has missed payment on a $1.2 billion term loan in June. 

TLB refers to the loan financing typically provided by institutional investors who intend to maximise total long-term returns on their investments.

Following this, the embattled edtech company saw its statutory auditor and three external board members resign citing “differences between the management and the board members". The three directors who have resigned are G V Ravishankar of Peak XV erstwhile Sequoia Capital India, Vivian Wu of Chan Zuckerberg Initiative and Russell Dreisenstock of Prosus. 

On Monday it was reported that Byju’s has yet again delayed the full and final settlement of its laid-off employees. The firm had earlier shifted the payment timeline from September to November.

Following a cash crunch, the edtech major made payments in a phased manner on a weekly basis and settled the payments of those that were due in October.

The firm first laid off 1,000 employees across various departments in June after it was hit by various hurdles. Later in August, another 400 employees were laid off, which Byju’s said were done after a performance review.

The employees let go from May to July were informed that they would receive their salaries along with the final settlement by September 15.

Byju's solutions

Last week, Byju’s resolved its longstanding issue with Davidson Kempner, linked with covenants in its subsidiary Aakash. In November, Manipal Group chairman Ranjan Pai bought out the debt investment of the US Hedge Fund, in a Rs 1,400-crore deal. 

The edtech company has also submitted a proposal to its $1.2-billion Term Loan B lenders to repay the loan within the upcoming six months. The company said it aims to repay the loan by making an initial payment of $300 million within the next three months.

Byju's financial results

Earlier this month, Byju's reported it saw a 2.3 times growth in revenue to Rs 3,569 crore at the end of FY22. Its EBITDA (earnings before interest, taxes, depreciation, and amortisation-based) loss of the core business was down from Rs 2,406 crore to Rs 2,253 crore in FY22, as per a statement from the company.

After the results, Raveendran said: “The takeaways from a uniquely belligerent year, which included nine acquisitions, are life-long learnings. The core business has demonstrated good growth, underlining the potential of edtech in India, the fastest-growing major economy. I am also humbled by the lessons learned in the post-pandemic world of readjustments. BYJU’S will continue on the path of sustainable and profitable growth in the coming years."

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