Byju's faces fund access hurdles amid legal dispute, CEO expresses regret over salary delay

Indian edtech startup, BYju’s finds itself embroiled in a legal dispute with investors, hindering its access to recently raised funds and impeding its ability to compensate employees promptly.

In a communication to staff, Byju Raveendran, the founder and CEO, expressed regret over the delay in processing salaries, attributing the setback to challenges in accessing capital amidst the ongoing legal tussle.

Raveendran assured employees of efforts to disburse February salaries, due on March 1, by March 10.

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"I regret to inform you that we will still be unable to process your salaries. Last month we faced challenges due to a lack of capital and now we are experiencing a delay despite having funds," stated Raveendran in an email seen by Reuters.

The legal dispute, involving four investors out of Byju's vast investor base, has resulted in a stalemate, preventing the startup from utilising funds raised through a recently concluded rights issue.

The funds, kept for operational expenses, are currently inaccessible due to the ongoing legal standoff.

Byju's recent rights issue, completed on February 28, aimed to address immediate financial obligations and operational costs.

However, the startup faces hurdles as four investors, including Prosus, General Atlantic, Peak XV Partners, and Sofina, sought a stay on the rights issue through India's company law tribunal.

This legal manoeuvre has compelled Byju's to maintain the raised funds in a separate escrow account until the dispute is resolved.

The legal entanglement adds to Byju's woes, following a series of setbacks since early 2023.

These include the resignation of its auditor, initiation of bankruptcy proceedings by lenders against a Byju's holding company, and a US lawsuit disputing loan terms and repayment.

Once known as one of India's premier startups, Byju's encountered more setbacks last month when investors, including Prosus and Peak XV, voted to oust Raveendran over governance, financial management, and compliance issues.

Byju's has contested the validity of this decision.

Byju's, known for its diverse educational offerings encompassing online tutorials and offline coaching, has not disclosed the exact amount raised through the rights issue.

(With inputs from Reuters)