BYJU’S Draws Investors Flak For Failing To Settle Debt Of INR 1,400 Cr

Amid the ongoing funding crisis at BYJU’S, investors have raised red flags over the management’s failure to recover about INR 1,400 Cr from a Dubai-based reseller, More Ideas General Trading LLC, while paying out INR 300 Cr in sales commissions. 

However, the edtech major has disputed the investors’ claim, as per an ET report.

In an extraordinary general meeting (EGM) notice, reviewed by ET, investors expressed that the company’s value has diminished because the management failed to assert its legal rights.

As per the document, More Ideas General Trading, BYJU’S sole selling agent in GCC countries, has a debt of over INR 1,400 Cr to the edtech firm. Despite paying commissions exceeding INR 300 Cr, the company has been unsuccessful in recovering the amount, considering sales of INR 634.18 Cr in FY22.

Speaking to ET, BYJU’S spokesperson said, “The figure of INR 1,400 Cr mentioned in the EGM notice — which is invalid in law — is grossly overstated.”

The spokesperson claims the outstanding net amount due is $74 Mn (around INR 614 Cr) based on products sold in a multi-year sales cycle. The company started recovering some dues in recent months through legal pressure, and the vendor has committed to pay the remaining $69 Mn (around INR 573 Cr) over the next one year. 

The spokesperson also added that BYJU’S has not booked any new sales from More Ideas General Trading in FY23 and FY24. “However, he (the vendor) continues to service students onboarded as part of the multi-year cycle.” 

Earlier this year, BYJU’S shareholders demanded an EGM to overhaul the board and leadership. Investors called for an EGM after BYJU’S initiated a $200 Mn rights issue at a post-money valuation of $225 Mn, marking a significant 99% drop from its previous valuation of $22 Bn. The EGM is scheduled for February 23. 

Incidentally, the concern with the reseller has been noted by auditor MSKA & Associates in BYJU’S FY22 annual report. Highlighting issues related to the company’s contractual arrangement with the Dubai-based unrelated party, as well as concerns about collectability and FEMA compliance. 

Sources familiar with the matter have informed ET that the ongoing FY23 audit may involve a more thorough examination of the arrangement with More Ideas General Trading.

BYJU’S witnessed a 27% increase in sales in GCC countries, reaching INR 634.18 Cr in FY22 from INR 497 Cr in FY21. In the annual report, the auditor highlighted that INR 260 Cr in revenues from product transfers were not recognised due to non-compliance with accounting standards related to the probability of collection.

However, the company paid 50% commission of the billed amount to the agent as per the terms of the arrangement—a sum of INR 300.37 Cr in FY22 and INR 237 Cr in FY21.

The company has been fighting on multiple fronts over the last two years. It continues to be plagued by a host of troubles, including the exit of board members, layoffs, delay in filing financial statements, growing losses, scrutiny of the Enforcement Directorate (ED), and a legal battle with the Board of Control For Cricket in India (BCCI).

In the past few months, key members of the board such as Russell Dreisenstock of Prosus, Chan Zuckerberg Initiative’s Vivian Wu, and Peak XV Partners’ GV Ravishankar resigned and the company is being probed by the Enforcement Directorate for an alleged Foreign Exchange Management Act (FEMA) to the tune of INR 9,000 Cr. 

Meanwhile, sources told Inc42 that BYJU’S has reached a revenue of INR 3,500 Cr in the first six months of the ongoing fiscal year (H1 FY24). The company aims to sustain this revenue rate for the full year. BYJU’S total revenue touched INR 6,500 Cr in the financial year 2022-23 (FY23), which concluded on March 31, 2023