Edtech Byju's Alpha Accused of Hiding $500 Mn From Lenders

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Edtech Byju’s Alpha Accused of Hiding $500 Mn From Lenders

| Updated: May 19, 2023 20:49

Byju’s Alpha, a prominent Indian tech company, is facing accusations from lenders of concealing $500 million (41 billion INR) amidst a legal battle for control of the company. The lenders made their claim during a court hearing in Delaware, where Byju’s Alpha is being sued over ownership rights. The lenders argue that a previous default grants them the authority to appoint their representative, Timothy R. Pohl, as the company’s controller.

This dispute marks another setback for Byju’s, a highly successful startup founded by Byju Raveendran. The company had already been working to address the concerns of creditors seeking to restructure a $1.2 billion term loan when government investigators conducted a search of their offices in April. Byju’s, based in Bengaluru, has been striving to launch an initial public offering for its tutoring division for several years.

During the court hearing conducted via telephone, Brock Czeschin, one of Pohl’s lawyers, revealed that a high-ranking executive at Byju’s Alpha had confessed to transferring $500 million out of the company. The motive behind this action, according to Joe Cicero, a lawyer representing Byju’s Alpha, was to safeguard the funds from predatory lenders. Cicero argued that the company had the right to carry out the transfer as stipulated in the loan agreement.

Sheron Korpus, an attorney for Byju’s Alpha, stated in an interview that the company is currently up to date with all debt payments, and any defaults should be considered technical breaches of the loan agreement. Despite this, Delaware Chancery Court Judge Morgan Zurn refrained from making a ruling on the appropriateness of the fund transfer. However, Zurn did rule in favour of the lenders by ordering Byju’s Alpha management to refrain from making significant changes within the company. A trial has been scheduled for later this year to determine who will assume control of Byju’s Alpha.

The lawsuit was filed by Glas Trust Company against Byju’s Alpha, its director Riju Ravindran, and Tangible Play Inc. These two entities are subsidiaries of Think and Learn Private, the edtech empire established by Byju Raveendran. According to regulatory filings, Ravindran also serves as a director of Think and Learn.

Czeschin argued during the hearing that Byju’s Alpha is merely a holding company that the lenders need control over to protect their rights, emphasizing that they do not intend to take over the entire edtech company. Byju’s Alpha countered by asserting that the lenders, who are distressed debt investors, are unfairly seeking to profit from the company’s debt. Cicero informed the court that Byju’s Alpha is expected to receive a substantial capital infusion within two weeks, enabling them to repay the $1.2 billion owed to the creditors.

“Cicero told Zurn that the lenders have engaged in a campaign to harm this business and they don’t want to run the company.” The case is officially known as Glas Trust Company vs Riju Ravindran, 2023-0488, in the Delaware Chancery Court based in Wilmington.

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