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India’s National Company Law Tribunal (NCLT), a quasi-judicial authority that deals with corporate disputes, on Tuesday admitted the beleaguered education technology startup Byju’s parent Think and Learn for insolvency resolution in response to a plea filed by the country’s national governing body of cricket- the Board of Control for Cricket in India (BCCI).
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This comes as a significant development for the future of Byjus- once India’s most valuable startup (it was valued at $22 billion in 2022) backed by marquee investors like Sequoia Capital, Tiger Global Management, Silver Lake and Mark Zuckerberg’s Chan Zuckerberg initiative.
It reflects the challenges faced by Indian startups in sustaining rapid ascents to steep valuations and unicorn-statuses.
Byju’s US unit had already filed for Chapter 11 bankruptcy proceedings in the US court of Delaware in February this year, listing liabilities in the range of $1 billion and $10 billion.
Case for Byju’s bankruptcy in India
According to Bar and Bench, the NCLT at Bengaluru on Tuesday admitted an insolvency plea filed by the Board of Control for Cricket in India (BCCI) against the parent company of ed-tech firm, Byju’s over a ₹158 crore debt.
The tribunal observed that it stood established that Byju’s had defaulted on a debt due to the BCCI over Indian cricket team’s jersey sponsorship deals.
The dues cited by BCCI were payable in respect of an agreement with Byju’s to sponsor the jerseys of the Indian cricket team.
According to rules of the Indian Bankruptcy Code, the company will now be run by a court-appointed interim resolution professional till the lenders form a committee of creditors which will then evaluate resolution plans to resurrect the company.
The spectacular rise and fall of the country’s most valuable startup
Founded in 2011 by Byju Raveendran and Divya Gokulnath, the ed-tech startup aimed at providing learning solutions to 150 million students around the world through interactive content as well as personalised learning methodologies.
A group company of Byju’s- WhiteHat Jr provided online coding classes to kids.
The ed-tech platform launched its app in 2015, and by 2018, with 15 million subscribers, Byju’s had clinched the unicorn status with a $1 billion valuation.
Covid-19, with its lockdowns and remote schooling, marked a watershed moment for the company as it seemed poised to cash in on the remote learning trend.
With funds pouring in, the pandemic saw the startup adopting an aggressive acquisition strategy, acquiring some 20 companies worldwide, spending nearly $3 billion on the blitzkrieg.
By April, 2021, its valuation had jumped to $15 billion and by March, 2022, its valuation had touched $22 billion.
But as the pandemic retreated, funds began to dry up and a downward spiral began as scale of operations declined and investors started slashing its valuations.
This coincided with an overall slowdown in the startup sector which saw significant correction in valuations of new-age companies across India and the world, compounding Byju’s woes.
In November, 2023, Prosus had marked down Byju’s valuation to below $3 billion and in January this year, BlackRock, world’s largest asset manager cut its implied valuation to about $1 billion.
For the fiscal year ending March, 31, 2023, its losses had ballooned to Rs 8,553 crore.
In February this year, investors called for an extraordinary general meeting (EGM) and voted to remove Raveendran and restructure the board.
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