The ongoing legal battle between BYJU’S, India’s most prominent edtech giant, and its U.S.-based lenders has intensified, with the lenders represented by Glas Trust firmly rejecting founder Byju Raveendran’s claims regarding the company’s debt. While Raveendran asserted that the company’s verified debt is a mere ₹20 crore, the lenders maintain that BYJU’S must repay the full $1.2 billion Term Loan B (TLB) plus interest. This unfolding scenario is likely to have significant consequences for BYJU’S, both financially and operationally.
Credits: Money Control
Background: BYJU’S $1.2 Billion Term Loan
The dispute arose from a $1.2 billion TLB that the edtech company’s subsidiary, BYJU’S Alpha, obtained from institutional investors in the United States. The lenders claimed that BYJU’S had violated the terms of the loan by transferring $500 million out of the United States, even though the loan was originally intended to help the company’s international expansion. When Glas Trust, acting on behalf of the lenders, sued BYJU’S in both Indian and U.S. courts to recover the money, the conflict intensified.
The claims have been refuted by BYJU’S, which claims that the lenders improperly hastened the loan repayment, which was initially scheduled for November 2026. In addition, Raveendran questioned the validity of Glas Trust’s $1.35 billion claim, stating that just ₹20 crore of debt had been confirmed through insolvency processes.
The Lenders’ Rebuttal: Demanding Full Repayment
The lenders, represented by Glas Trust, responded strongly to Byju Raveendran’s claims. They reiterated that BYJU’S does not have the authority to disqualify any lenders and that the company is obligated to repay the full $1.2 billion TLB, irrespective of the loan’s current trading price. They also clarified that the issue of whether any lender is a “distressed fund” is irrelevant to the ongoing court proceedings.
According to the lenders’ panel, key personnel at BYJU’S have abandoned the company, including the CEO, CFO, and General Counsel. Additionally, the company’s second auditor resigned in less than two years, exacerbating the financial crisis. These developments cast doubt on BYJU’S ability to manage its financial obligations effectively, further weakening its position in the legal dispute.
Potential Impact on BYJU’S
The consequences of this legal battle are likely to be severe for BYJU’S, which was once India’s most valued startup. The company is already grappling with a series of financial challenges, including multiple layoffs, delayed salary payments, and a shrinking valuation. If BYJU’S is forced to repay the full $1.2 billion TLB along with interest, it could strain its already stretched financial resources, further eroding investor confidence.
Impact on Operations
The departure of important employees and the resignation of auditors could cause operational difficulties for BYJU’S, making it more difficult for the company to stabilize its operations. A lack of internal leadership and continuous legal disputes could cause the company to put off important strategic choices like getting fresh capital or changing its financial strategy.
Furthermore, BYJU’s focus on its primary business of offering educational services may be taken away from the legal dispute, which might lower user happiness and could have an impact on the company’s market position in the edtech industry.
Investor Sentiment and Market Valuation
Investor confidence in BYJU’S has already been shaken, with the company’s valuation reportedly falling from a peak of $22 billion to $5.1 billion. The mounting legal troubles and potential financial liabilities could lead to a further decline in valuation. Investors might also become more cautious about backing BYJU’S, especially in light of the allegations regarding the missing $500 million.
This legal battle also highlights the risks associated with startups raising substantial amounts of capital through foreign loans, particularly when those loans are tied to complex legal agreements that could lead to severe penalties if violated. Other startups in India may become more wary of securing similar loans from overseas lenders in the wake of BYJU’S predicament.
Conclusion: The Road Ahead for BYJU’S
Though there is still much to be resolved in the legal battle between BYJU’S and its American lenders, the decision will probably have a lasting effect on the massive edtech company. Even though Byju Raveendran isn’t backing down, the business may not have many options due to its operational and financial difficulties. BYJU’S and the larger Indian edtech sector may undergo major changes if the company is forced to return the entire $1.2 billion TLB.
