Sale of Epic to resolve term loan litigation, help mitigate current liquidity crunch: Byju Raveendran assures senior leadership

Amid a severe cash flow crunch at Byju’s, founder Byju Raveendran held a conference call with senior executives to address the ongoing crisis and provide assurance regarding the company’s current turnaround initiatives.

Addressing the senior leadership, Raveendran highlighted the ongoing litigation surrounding the $1.2-billion Term Loan B (TLB) as a significant issue, which originated from a delayed audit and demand for a full refund from lenders. He said the company is engaged in active negotiations with the lenders to reach a resolution and expressed optimism that the sale of US-based subsidiary Epic, a kids-focused digital reading platform it acquired in 2021, will help the company resolve the issue.

Byju’s has been entangled in a legal battle with TLB lenders due to delays in repayment. The term loan, availed during the peak of its growth in 2021 to support an aggressive acquisition spree, has been a major pain point for the company even as it fights a plethora of problems including a severe cash crunch. Byju’s spent close to $3 billion across 13 deals in 2020-21, and the TLB was raised primarily to bankroll the acquisitions. As growth slowed down and equity became scarce, the company found itself ensnared in the consequences of its high-risk gamble.

Epic and higher education platform Great Learning have been put on sale to raise immediate funds to meet the repayment obligations towards the term loan. The company is in advanced talks to sell Epic for about $400 million to private equity fund Joffre Capital Ltd.

He assured his senior executives that the proceeds from the sale of Epic will also help manage the liquidity crunch the company is facing now.

The company delayed the payment of November salaries for a part of its employees, which it attributed to an “unexpected technical glitch” in the payroll system. However, as per a Bloomberg report, Raveendran pledged his under-construction villa and his family members’ homes worth Rs 100 crore to pay salaries to 15,000 employees in Byju’s parent firm, Think & Learn Pvt.

Expressing regret for the limited face time with the team, he stated, as per an individual privy to the meeting discussions, “My regret is that I am letting down a wonderful team by not providing adequate capital.”

Raveendran identified the ED notice and the delay in closure of the FY23 statutory audit as other key challenges. ED had said recently that Byju’s violated Foreign Exchange Management Act norms by delaying the filing of documents against the foreign investment of about Rs 8,000 crore and failing to allot shares against these. However, he reassured that significant progress has been made in resolving these issues, with procedural deficiencies addressed under FEMA for the ED notice and the FY23 audit on track for a completion.

He also mentioned that Manipal Education and Medical Group’s Chairman Ranjan Pai’s investment of for Rs 1,400 crore has settled Davidson Kempner's debt exposure in Aakash Education. He said that Aakash is now set for a record-breaking admissions season.

He likened the current situation to a war on multiple fronts and called on his leadership team to rise and fight alongside him. “A true entrepreneur is a war leader,” he said. “What Byju’s is going through can only be seen as a war on multiple fronts against all odds,” he added.

Raveendran said despite the personal sacrifices he has made, including putting his entire personal wealth back in the company, he remains dedicated to rebuilding the company. He also committed to be transparent with his employees, stating that he no longer ‘sugar-coats’ his words.

Also Read: Byju's founder pledges homes worth Rs 100 cr to pay salaries to employees: Report