In a new setback for the prominent educational technology company Byju’s, the Enforcement Directorate (ED) has taken action against its founder, Byju Raveendran, preventing him from traveling outside India. Specifically, the central agency has issued a lookout circular against the 43-year-old entrepreneur. Initially, the ED had placed a lookout circular ‘on intimation,’ meaning that immigration authorities would notify relevant officials about any foreign trips undertaken by Raveendran. However, the recent development signifies a more stringent measure, potentially impeding his ability to leave the country.
Once hailed as a beacon of India’s startup ecosystem with a valuation exceeding $20 billion, Byju’s faced significant setbacks last year, experiencing substantial losses and a dramatic decline in valuation by approximately 90%. Additionally, it lost key investors, and its auditor, Deloitte, resigned. Furthermore, Byju’s is embroiled in a legal dispute with lenders in the United States over a $1.2 billion loan.
Raveendran, a former engineer who witnessed rapid success prior to the ongoing crisis, has faced criticism for Byju’s faltering fortunes. Shareholders have requested an extraordinary general meeting to be held imminently to remove Raveendran and appoint a new board. However, a Karnataka High Court order has temporarily halted any decisions made at the meeting until the next hearing, offering Raveendran some reprieve.
Although Byju’s contends that the meeting serves as a disruption tactic, investors remain steadfast in their determination to oust Raveendran as CEO. Despite the court’s intervention, sources within the investor community indicate that the meeting will proceed, and efforts to remove Raveendran will persist.
Byju’s Remarkable Ascent Followed by Dramatic Decline
Byju Raveendran established classes for MBA aspirants preparing for the CAT exam in 2006, marking the genesis of what would become Byju’s. Over time, the educational technology firm expanded its offerings to include undergraduate and school students. In 2015, the Byju’s learning app was launched, propelling the company to unicorn status within four years, making it the first ed-tech unicorn in India. The onset of the Covid-19 pandemic accelerated Byju’s growth as schools transitioned to online teaching, leading to a surge in demand for its services.
However, the company soon encountered challenges. Reports emerged alleging a toxic work environment and aggressive marketing tactics that troubled parents. In 2021, Byju’s valuation was slashed by 75% by Prosus, resulting in layoffs and allegations of financial mismanagement. During its peak, the company invested heavily in sponsorship deals, including endorsements with the Indian cricket team, the Football World Cup, and signing football icon Lionel Messi as a global ambassador. As schools resumed in-person teaching, Byju’s faced significant losses, culminating in Raveendran mortgaging personal assets late last year to secure a loan for staff salaries.
Additionally, Byju’s foreign investments have attracted scrutiny from the Enforcement Directorate. Prior to the lookout circular against Raveendran, the ED issued showcause notices to Byju’s parent company, Think & Learn, for alleged violations amounting to over ₹9,362 crore under the Foreign Exchange Management Act.
