Byju Raveendran, Pai planning an 'out-of-court' settlement with US lenders

Ranjan Pai, chairman of Manipal Education and Medical Group (MEMG), along with Byju Raveendran, the founder of the beleaguered education technology startup Byju’s, is planning to reach out to US lenders represented by Glas Trust for an out-of-court settlement, according to sources. They said Pai and Raveendran may offer around $250 million.

The dispute revolves around the $1.5 billion Term Loan B (TLB) guaranteed by Think and Learn Pvt Ltd, the parent of Byju’s.

Valued at $22 billion in 2022, Byju’s has seen its fortunes decline due to a cash crunch, regulatory issues, and disputes with investors, including a battle with US lenders demanding $1 billion in unpaid dues, triggering the firm’s insolvency.

 

Last month, the Supreme Court reserved its verdict on a plea from US firm Glas Trust Company LLC against the National Company Law Appellate Tribunal (NCLAT) order stopping insolvency proceedings against Byju’s. The apex court asked the insolvency resolution professional (IRP) to maintain the status quo until it delivers its judgement.

During the hearing, the court questioned the NCLAT verdict that set aside insolvency proceedings against Byju's and approved its Rs 158.9 crore dues settlement with the Board of Control for Cricket in India (BCCI). It noted that NCLAT did not apply its mind while closing the insolvency case against the ed-tech major.

“The lenders are waiting for the SC order before responding to the settlement offer. A favourable order will allow them to enter the insolvency process, from which they were disqualified. It’s typical brinkmanship bond traders are known for,” said a source familiar with the matter.

There are various possible outcomes related to the Supreme Court order that Byju’s and the lenders are anticipating.

“The court may send the dispute back to NCLAT for fresh adjudication, potentially allowing Glas Trust Company to become part of the case, which would not be favourable for Byju’s,” said the source. “Another possibility is that NCLAT doesn't change its order or the Supreme Court dismisses the case brought by US lenders.”

Last month, Glas Trust Company told the Supreme Court that it had been wrongly removed from the Committee of Creditors (CoC) by the IRP managing the insolvency proceedings against Byju's. The CoC is a group of lenders that make decisions about an insolvent company in the resolution process.

Last year, Ranjan Pai invested $168 million (Rs 1,400 crore) in Byju’s test-prep subsidiary, Aakash Educational Services Limited, helping repay a loan from US-based investment firm Davidson Kempner Capital Management, which led to legal complications. Pai was also reportedly in discussions to invest another $350 million in Byju’s as equity and debt.

“If the out-of-court settlement with the US lenders is successful, Ranjan Pai could secure a majority stake in Aakash, and Raveendran may get a chance to revive the company,” a source said.

According to industry sources, Manipal Health Systems holds a 39.95 per cent stake in Aakash, Think & Learn holds 25.75 per cent, and Singapore-based Beeaar Investco Pte Ltd has 16.09 per cent. Aakash founder J C Chaudhry holds 11.12 per cent, and Singapore-based VII Topco1 Pte Ltd holds 6.91 per cent.

Byju Raveendran, the founder of Byju’s, recently acknowledged the severe challenges faced by the company, saying, “The company is worth zero now. We need to rebuild from scratch, brick by brick.”

“I only need to see a 1 per cent chance to make it work. I’m not concerned about the outcome of the court order. Whatever happens, I will find a way out. No problem in this world is unsolvable,” Raveendran told reporters from his residence in Dubai.

Byju’s investors have argued in court that the company siphoned off $533 million and sought a stay on the firm’s rights issue. The company and its investors have been at odds at the National Company Law Tribunal (NCLT) this year over the firm’s $200 million rights issue, alleging oppression and mismanagement.

A group of four investors — Prosus, General Atlantic, Sofina, and Peak XV (formerly Sequoia) — sought a stay on the rights issue, claiming it was at less than 99 per cent of Byju’s peak valuation of $22 billion. They were supported by other shareholders, including Tiger Global and Owl Ventures.

“We have not committed any intentional wrongdoing. There has been no siphoning of funds or fraud. If there was, why would I put all my family money back into the company?” asked Raveendran.

“If you think we are doomed and people want to destroy Think & Learn (Byju’s parent), it won’t be easy because we won’t give up,” he said.