After BYJU’S Denial, ED Says Issued Show Cause Notice For FEMA Violation Of INR 9,362 Cr

Hours after BYJU’S unequivocally denied reports of it receiving show cause notices from the Enforcement Directorate (ED), the agency has now publicly stated that it has issued show cause notices to the embattled edtech giant over FEMA violations. 

“The Adjudicating Authority under the Foreign Exchange Management Act (FEMA), 1999 has issued show cause notices to Think & Learn Private Limited and Byju Raveendran on the basis of the complaint filed by the Directorate of Enforcement… with respect to the contraventions of the provisions of FEMA, 1999 to the tune of INR 9,362.35 Cr,” the ED said in a statement. 

Inc42 has reached out to the company for a response on the development. The story will be updated on receiving a comment from the edtech giant. 

In the statement, the ED flagged a slew of contraventions by Think & Learn, the parent company of BYJU’S, and the edtech giant’s founder Raveendran:

• Failure to submit documents of imports against advance remittances made outside India
• Failure to realise proceeds of exports made outside India
• Delaying filing of documents against foreign direct investment (FDI) received into the company
• Failure to file documents against the remittances made by the company outside India
• Failure to allot shares against FDI received into the company

The agency said it initiated a probe into BYJU’S after receiving various complaints pertaining foreign investments and business conduct of the edtech startup. 

Reiterating its stance, the ED noted that the startup made ‘significant foreign remittances outside India and investments abroad’ which caused loss of revenue to the exchequer. 

Eventually, the agency conducted search and seizure operations at multiple premises linked to the edtech giant and Raveendran in April this year. During the operations, the ED seized documents related to overseas investments as well as funding raised by the company. 

The ED, then, also recorded statements of Raveendran as well as the then chief financial officer (CFO) of BYJU’S. Eventually, the enforcement sleuths zeroed in on the charges and ‘concluded’ that the edtech juggernaut flouted various provisions of the foreign exchange laws. 

BYJU’S Saga Of Troubles

The late evening development adds to a flurry of activity that BYJU’S braced during the entire day. First, reports surfaced that the probe agency had sent show cause notices to BYJU’S. The company quickly responded and rejected all such reports. 

“BYJU’S unequivocally denies media reports that insinuate it has received a (any) notice from the Enforcement Department. The company has not received any such communication from the Enforcement Department,” the edtech major said. 

Later in the day, BYJU’S assuaged its shareholders, saying it is fully compliant with the regulations and termed reports of ED notice as being entirely based on hearsay. It also told the shareholders that a recent due diligence exercise by a top law firm found no FEMA violations by the company and that it has maintained a ‘cooperative stance’ with the ED and answered all the agency’s queries. 

The public statement by ED has now put all the claims by BYJU’S under the scanner. This comes as the embattled edtech juggernaut has been in the news for all the wrong reasons. 

Earlier this month, the company released parts of its financial statements for 2021-22 (FY22) after missing the deadline multiple times. BYJU’S, excluding its acquired businesses, reported a standalone EBITDA loss of INR 2,253 Cr in FY22 compared to INR 2,406 Cr in FY21. 

It was this very delay that led to the departure of its statutory auditor Deloitte earlier this year, which was followed by the exit of half of BYJU’S board members. The company, which has been hit by mass layoffs and high-level exits, has also been embroiled in a potential debt crisis pertaining to its $1.2 Bn term loan B (TLB).