Edtech firm Byju’s has been in the news for all the wrong reasons lately. The District Consumer Disputes Redressal Commission in Indore in Madhya Pradesh has issued an order against a staffer of ed-tech firm Byju’s and film superstar Shah Rukh Khan for alleged ‘fraudulent behaviour’ and ‘unfair trade practice’ on the complaint of a woman who enrolled for coaching to become an Indian Administrative Service (IAS) officer, Rediff reported.
The aspirant also alleged she was lured into the course through false and misleading online advertisements on behalf of Byju’s competitors, adding that she was influenced by an advertisement by Shah Rukh Khan. She also said that she was promised a refund which was still not paid. The district court has given a 30-day deadline to the ed-tech firm’s Indore-based manager and the actor to jointly or separately refund the amount.
The development comes days after the Enforcement Directorate (ED) raided offices of Byju’s CEO Raveendran under Foreign Exchange Management Act (FEMA) for allegedly receiving Rs 28,000 crore worth of foreign direct investment (FDI) between 2011 and 2023.
ED has conducted searches at three premises in Bengaluru in the case of Raveendaran Byju and his company ‘Think & Learn Private Limited’ (Byju online learning platform) under the provisions of Foreign Exchange Management Act (FEMA).. During the search, various incriminating documents and digital data was seized, the ED stated on its official Twitter handle.
Byju’s is one of India’s biggest startups, once valued at $22 billion. It has attracted global investors such as General Atlantic, BlackRock and Sequoia Capital, which have invested in the company over the years.
Reuters reported that a memo by CEO Byju Raveendran sent late on Saturday stated, “As we are funded by 70+ impact investors who have satisfactorily done due diligence on our operations, including all FEMA (Foreign Exchange Management Act) compliance, we are confident that the authorities will also come to the same conclusion.”
The agency also said that the company remitted 97.5 billion rupees to various foreign jurisdictions between 2011 and 2023 in the name of overseas direct investments.
In the internal memo, Raveendran said that the company had sent some money overseas to fund its international acquisitions.
Byju’s declined to comment on the issue.
Sreedhar Prasad, internet business expert and former partner at KPMG tells Storyboard that he believes that Byju’s grew really fast till 2021, and possibly the company did not have the processes and systems to catch up to this unprecedented growth among startups in India.
“This is the right time for Byju’s to go back to the drawing board and relook at their fundamental value proposition to the end customer. Somewhere they have lost the track of being a powerful edtech company, in pursuit of scale. The end value to the customer should be the primary focus, scale and profitability will be an outcome of that,” he notes.
In March 2022, when Byju’s scored the coveted FIFA World Cup 2022 sponsorship, the Internet – at least in some parts of India – was abuzz. The startup, which raised $800 million in fresh funding as part of a pre-IPO round, taking the company’s valuation to $22 billion, made a mark on international shores leveraging what is arguably the most popular global football event.
The FIFA World Cup Qatar 2022 was scheduled from 21 November to 18 December 2022. The event was expected to give the company a global push as it aims to scale operations in international markets such as the US, UK, Brazil, Indonesia and Mexico, among others – all top football/soccer consuming markets. It was a strategic move given Byju’s acquisition spree having acquired Great Learning and US-based Epic to diversify its offerings in the growing ed-tech space.
The ed-tech platform has been trying to make deeper inroads into the US market, and Latin American region, as part of its international expansion roadmap. But the company was trolled for spending money on sponsorship while laying off staffers in India.
Prasad feels the criticism is misplaced and drawing parallels between their marketing spends (on FIFA sponsorship) and layoffs is slightly over stretched.
“One has to invest in a popular property to get a global acceptance as an Indian brand. That cannot be correlated with sacking people. Layoffs are a function of relevance and possible over-hiring and how that can be correlated with marketing spends,” he adds.
Prasad says he has a sympathetic view of this brand as they are a company that is ‘Made in India’ for one of the most high impact sectors that is getting digitized.
“Though it is time for them to behave like a $20 billion valued company in every manner, they should have finesse, compliances in place and governance of a big conglomerate,” he concludes.