Byju’s, the Bengaluru-based edtech giant, has vehemently denied allegations of hiding $500 million through its non-operative U.S. entity, Byju’s Alpha. The claims were made during a court hearing in Delaware, where Byju’s Alpha is embroiled in a legal battle over control of the company. The litigants insinuated that the funds were wrongfully concealed or transferred, but Byju’s has firmly refuted these allegations, stating that the transfers were fully compliant and did not contravene any terms of the Credit Agreement.
In a statement, Byju’s clarified, “This is entirely incorrect. We categorically deny these allegations. The transfers were in full compliance and did not contravene any terms of the parties’ Credit Agreement and the agreed-upon rights and responsibilities.” The company explained that as Byju’s Alpha is a non-operative entity, the funds were transferred to other operational entities for the purpose of driving the growth and expansion of global operations.
Byju’s highlighted that the Term Loan B agreement was established with the explicit intention of utilizing the raised funds for global expansion, and the company had the freedom to transfer and utilize the funds as needed. Furthermore, Byju’s emphasized that it had met all its contractual payment obligations as per the signed Term Loan B and had not missed a single payment.
The court order does not have any impact on Byju’s other subsidiaries worldwide, and it is important to note that it is a temporary order, with no final determination made against Byju’s Alpha.
The legal dispute is a setback for Byju’s, which has been regarded as one of India’s most successful tech companies. The firm has been striving to appease creditors amid efforts to restructure a $1.2 billion term loan. Additionally, Byju’s has been preparing for an initial public offering (IPO) of its tutoring unit. However, the company faced further challenges when government investigators conducted a search of its offices in April.
During the court hearing, allegations emerged that a top manager at Byju’s Alpha had admitted to transferring $500 million out of the company. The lenders argued that due to a default earlier this year, they had the right to appoint their representative to take control of Byju’s Alpha. However, Byju’s Alpha’s legal team contended that the money had been moved to protect it from predatory lenders and was within the rights granted by the loan agreement.
Delaware Chancery Court Judge Morgan Zurn did not make a ruling on the appropriateness of the fund transfer but did issue an order preventing substantive changes at Byju’s Alpha until a trial is held later this year to determine control of the company.
The lawsuit was filed by Glas Trust Company against Byju’s Alpha, its director Riju Ravindran, and Tangible Play Inc., both of which are subsidiaries of Think and Learn Private, the edtech empire founded by Byju Raveendran. The lenders are distressed debt investors seeking control of Byju’s Alpha to protect their rights.
The legal battle between Byju’s Alpha and the lenders is likely to continue. Still, Byju’s Alpha expressed confidence in securing a large capital infusion in the coming weeks that would enable it to repay the $1.2 billion owed to creditors. The company accused the lenders of engaging in a campaign to harm its business and insisted that they have no intention of running the company themselves.
