 "'Pay salaries or face an audit': NCLT warns crisis-hit edtech firm Byju's")
The National Company Law Tribunal (NCLT) on Thursday directed the crisis-hit edtech firm Byju’s to pay its employees’ salaries, even if it doesn’t have access to the funds raised through its rights issue.
“You are a company that is functioning. Surely, you should be having revenues,” the Bengaluru bench of NCLT told Byju’s, warning that its failure will result in an audit by the Institute of Chartered Accountants of India (ICAI).
The tribunal made the remarks while hearing a plea by the firm’s employees over the issue.
What has triggered the Byju’s crisis?
Byju’s is reeling under a major financial, legal and operational crisis. Valued at about $22 billion a couple of years ago, Byju’s is currently valued between $1 billion and $3 billion. The company, which once signed up Shah Rukh Khan and Lionel Messi as part of its marketing deals, has witnessed a freefall in recent years due to a number of factors including poor financial decisions. Between 2017 and 2021, Byju’s made six acquisitions that did not generate the anticipated revenue. Byju’s US entity has filed for bankruptcy proceedings.
Besides poor acquisitions, aggressive marketing, and financial mismanagement are other factors that have contributed to Byju’s downfall. The company’s founder, Byju Raveendran, has a net worth amounting to zero today.
Byju’s faces investor showdown
At present, the company is entangled in a battle with its investors at the NCLT over a $200 million fund raised through the rights issue. This comes after the company’s foreign lenders approached the tribunal seeking corporate insolvency proceedings against the firm.
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Amid the dispute, Byju’s appeared before the NCLT on Wednesday requesting 48 hours to determine whether it should undertake not to pledge, sell, or transfer its assets. This case will now be heard on July 9.