Byju’s has reached out to all its investors and assured them that the firm has not violated any foreign exchange rules. The issue regards an alleged show-cause notice issued by the federal financial crime-fighting agency, Enforcement Directorate (ED), to the edtech giant involving Foreign Exchange Management Act (FEMA) violations. It assured the investors that the firm has always been fully compliant with FEMA regulations.
“We want to assure you that Byju’s has always been fully compliant with FEMA regulations,” said the letter sent by the company to all the investors, a copy of which was reviewed by Business Standard. “The news story in question is entirely based on hearsay and lacks any factual basis. As of today (November 21 evening), Byju’s has not received any such notice, as mentioned in the article.”
ED has reportedly issued a show-cause notice to Byju’s for alleged violations of foreign exchange rules, according to media reports by CNBC-TV18 and Reuters. The agency has alleged violations by the company worth Rs 9,000 crore ($1.1 billion) under the FEMA, reported CNBC. Notices were sent to Byju’s founder Byju Raveendran and its parent company Think & Learn Pvt Ltd.
“We are attaching an email from one of India’s largest and most trusted law firms, which highlights the results of a comprehensive due diligence conducted on Byju’s,” said the letter. “The email confirms that the due diligence found no FEMA violations at Byju’s.”
The letter stated that Byju’s has maintained a cooperative stance with the ED throughout their inquiries. “We have satisfactorily answered all their queries, both verbally and on record,” said the letter. “We understand that such news can create uncertainty and concern, but we want to assure you that Byju’s continues to operate in full adherence to regulatory frameworks.”
The company has garnered $5.8 billion in total funding from investors such as Qatar Investment Authority (QIA), Sumeru Ventures, Vitruvian Partners, BlackRock, Chan Zuckerberg Initiative, Sequoia, Silver Lake, Bond Capital, Tencent, General Atlantic, and Tiger Global.
“Byju’s unequivocally denies media reports that insinuate it has received any notice from the Enforcement Directorate,” said a Byju’s spokesperson on Tuesday. “The company has not received any such communication from the Enforcement Directorate.”
In April this year, the Directorate of Enforcement (ED) conducted searches and seizure action at the premises of Byju’s, the founder and chief executive officer of the firm Byju Raveendran. A day after that, Raveendran said that the company has taken all efforts to fully comply with all applicable foreign exchange laws. “All our cross-border transactions have been duly vetted by both the company’s professional advisors and counsel, and the advisors and counsel of the investment funds and other sophisticated counterparties,” said Raveendran, in a letter addressed to the employees in April this year. “Additionally, all such transactions are routed only through regular banking channels (and) the RBI’s authorised dealer banks and the requisite documentation and statutory filings have been duly submitted. I want to reassure you that we are fully cooperating with the authorities,” he added.
In April, ED conducted searches and seizure action at three premises of the Bengaluru-based firm. These three premises include two business units and one residential property in Bengaluru in the case of Byju Raveendaran and his company ‘Think & Learn Private Limited’ under the provisions of the FEMA.
During the search and seizure action, various incriminating documents and digital data were reportedly seized. FEMA searches also revealed that the company has received foreign direct investment to the tune of Rs 28,000 crore (approximately) during the period from 2011 to 2023.
Raveendran said in the letter that Byju’s has made a number of overseas acquisitions (investing an amount of approximately Rs 9,000 crore) over the years as part of its growth strategy. These acquisitions have been instrumental in expanding its reach and impact.
“In order to fund these acquisitions, we have remitted some of our funding overseas,” said Raveendran. “I also want to highlight that Byju’s has brought more FDI (foreign direct investment) to India than any other Indian startup (Rs 28,000 crore), and as a result, we have been able to create job opportunities for more than 55,000 talented professionals. This makes us India’s largest employer among startups.”
He said the information requested by and furnished to the officers in connection with the FDI raised, overseas investments made, and cross-border transactions relating to marketing and branding activities by Byju’s has previously been submitted by the company’s authorised representatives.
The reported allegations come at a time when Byju’s is currently facing a multitude of challenges, including securing fresh capital, delays in financial reporting and legal disputes with lenders. The firm’s valuation, once pegged at $22 billion, has been plunging with investors marking down their holdings. It is locked in a dispute with lenders in the US over a missed interest payment on a $1.2 billion term loan B (TLB).