Byju's CEO defends company's adherence to foreign exchange laws in wake of ED raid

BYJU RAVEENDRAN

Shortly after the Enforcement Directorate (ED) conducted searches at three of Byju's Bengaluru locations, Byju's CEO Byju Raveendran sent an email to all employees on the night of April 29, assuring them that the company is working together with the authorities.

Raveendran's assurance to employees about cooperation with the authorities also comes on the back of ED's statement that said he 'remained evasive and never appeared' during the investigation even after several summonses were issued.

"I wanted to take a moment to address the recent news of the Enforcement Directorate's searches at our premises in Bangalore… I understand that this news may have caused concern…," Raveendran told employees, in the email, a copy of which Moneycontrol has seen.

Queries sent to Byju's did not elicit an immediate response.

The search was conducted under the provisions of the Foreign Exchange Management Act (FEMA), and resulted in the seizure of incriminating documents and digital data, Moneycontrol reported earlier.

Byju’s founder said that the company is funded by over 70 investors, who have done due diligence on their operations, which includes FEMA compliance. “We are confident that the authorities will also come to the same conclusion,”  he said.

According to the ED, Byju's remitted about Rs 9,754 crore to various foreign jurisdictions during the same period in the name of overseas direct investment, ED said.

In the mail to its employees, Raveendran said the company had remitted some of its funding overseas to support multiple international acquisitions, over the past year. The founder said Byju’s invested approximately Rs 9,000 crores in the purchases.

“Byju's has taken all efforts to fully comply with all applicable foreign exchange laws and all our cross-border transactions have been duly vetted,” he said, in the internal email. Raveendran added that all transactions are routed only through regular banking channels and the RBI’s authorised dealer banks.

He also said that Byju’s brought about Rs 28,000 crores in FDI to India, which he claimed is more than any other Indian startup. “As a result, we have been able to create job opportunities for more than 55,000 talented professionals. This makes us India’s largest employer among startups,” he said.

This comes after FEMA searches revealed that the company received foreign direct investment to the tune of approximately Rs 28,000 crore during the period from 2011 to 2023, the ED said in a statement.

Byju’s chief, however, claimed that the company had previously submitted all the information requested on FDI raised, overseas investments made, and cross-border transactions relating to marketing and branding to the concerned authority.

Byju's, which is also India's most-valued startup, has been under fire since the start of 2022 for a range of issues including accounting irregularities, alleged mis-selling of courses, and mass layoffs. The company has laid off over 3,500 employees in the last 12 months as it was hit by a double whammy of drying venture capital funding and slowing demand for online learning services.

In its statement, ED had also said that the company has not prepared its financial statements since the financial year 2020-21 and has not got the accounts, audited which is mandatory.

Byju's filed its FY21 results after a long delay of 18 months in September 2022. The company reported a widening loss of more than Rs 4,500 crore.

Further investigation is under progress, ED said.

ED's searches have become the latest setback for Byju's, which is currently renegotiating terms with its creditors (of term loan B) after having defaulted on certain conditions including providing monthly business updates, hiring a CFO, and increasing the interest rate on the loan. Byju's, however, hired Vedanta's executive Ajay Goel as its CFO earlier this month.

Byju's had raised a term loan B (TLB) of $1.2 billion from a clutch of investors in 2021, one of the largest for Indian startups. The company also offered to increase the rate of interest on its $1.2 billion TLB as part of renegotiating its debt-financing arrangements. Creditors were also seeking prepayment of $200 million, according to a media report.

Byju's has also been trying to raise as much as $700 million, part of which will be used to repay the debt. The company is planning to raise the new funds at its existing $22 billion valuation. This will be Byju's second flat fundraise since October.