The Supreme Court of India has dealt a significant blow to Byju’s and its creditors, including the Board of Control for Cricket in India (BCCI), by rejecting a settlement that could have allowed the embattled edtech company to avoid insolvency as per Bloomberg.
The ruling pushes Byju’s closer to a full-fledged insolvency process, marking a low point in the company’s high-profile journey from a celebrated startup to a firm on the brink of collapse.
Setback for Byju’s and Byju Raveendran
The Supreme Court’s decision to strike down a tribunal order is a major setback for Byju Raveendran, the founder of Byju’s, who had been fighting to regain control of his company. Byju’s, once valued at $22 billion, was a flagship of India’s booming startup scene and became a household name during the COVID-19 pandemic, offering online education services that boomed during lockdowns. However, as normal life resumed and classrooms reopened, Byju’s found itself facing a severe cash crunch and mounting legal issues.
The Supreme Court ruling also represents a win for the US-based creditor Glas Trust Company, which opposed the settlement between Byju’s and BCCI, India’s cricketing authority. Glas Trust is one of the major creditors seeking repayment from Byju’s and played a pivotal role in contesting the arrangement.
BCCI and Glas Trust in financial limbo
The rejection of the settlement now forces BCCI, one of the firm’s major creditors, back to the bankruptcy court alongside Glas Trust and other stakeholders. BCCI was owed 1.59 billion rupees (approximately $18.9 million) by Byju’s, but the situation has grown increasingly complicated as US creditors, led by Glas Trust, have also staked claims, seeking their share of a $1.2 billion debt.
Glas Trust has previously argued in US courts that any payments made to the BCCI should be halted until Byju’s clears its debts to the American creditors. This tug-of-war leaves both the BCCI and Glas Trust in financial limbo, awaiting further decisions from India’s insolvency courts.
Insolvency looming for Byju’s
With the Supreme Court’s latest order, Byju’s is on the verge of entering India’s formal insolvency process. This means that the company will now be overseen by a court-appointed professional until a creditors’ panel is formed to manage the case. This panel will then assess claims from various creditors and, if necessary, invite bids for Byju’s from potential buyers. If no buyer is found, the company could face liquidation.
The insolvency process comes after an August ruling by an Indian appeals court that allowed Byju’s to settle with the BCCI. However, the Supreme Court’s rejection of that settlement puts the company back at square one, with insolvency now appearing increasingly likely.
Byju’s: Poster child of struggles in Indian Tech
Byju’s meteoric rise and sharp fall mirror the challenges faced by other high-profile Indian startups. Once a darling of India’s tech scene, Byju’s isn’t alone in its struggles. Other firms, like Paytm, which transformed the country’s online finance landscape, have also encountered financial and legal challenges in recent years.
Byju’s woes are a stark reminder of the difficulties faced by tech companies in sustaining rapid growth, particularly in the post-pandemic era. With legal battles raging in both the US and India, the company’s future hangs in the balance as it inches closer to insolvency.
What’s ahead for BCCI?
The Supreme Court’s decision to reject Byju’s settlement with the BCCI is a turning point for the once-prominent edtech giant. With the company now likely to enter insolvency proceedings, creditors like BCCI and Glas Trust face uncertainty over their repayments. For Byju Raveendran, this ruling represents a critical challenge in his bid to save the company he founded, while also signalling a broader cautionary tale for India’s startup ecosystem.
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