Proceedings initiated against Byju's under companies law 'still ongoing': MCA

The Ministry of Corporate Affairs (MCA) Wednesday said its proceedings against edtech firm Byju’s under the companies law are still in progress, and that "no final conclusion be drawn in this matter at this stage."

Reports that Byju’s has been “cleared of financial fraud in an ongoing investigation by the MCA” are therefore “misleading,” the ministry said in a statement.

Earlier in the day, people privy to the details of investigation by the Registrar of Companies (RoC), Karnataka, had said the probe didn't unearth any material evidence to suggest Byju's promoters resorted to fraud or siphoned off funds, but it clearly flagged lapses in the edtech firm's corporate governance practices.


Experts said once the relevant RoC, or regional directors, which function under the MCA, wrap up probe in key cases, the findings are sent to the ministry. The MCA can then endorse the findings as they are - or seek more details before the report is finalised, analysts said.

The people cited earlier had also said the RoC probe findings so far suggested Byju’s promoters and directors could have been “more transparent” in their actions.

Byju Raveendran is the founder and chief executive of the company, besides his wife Divya Gokulnath, who is also a founder. His brother Riju Ravindran also owns a stake in the company as part of the promoter group – and a board seat as well.

Meltdown

Byju’s was once the country’s most valued startup with a valuation of $22 billion. But the firm is now struggling to cope with a cash crunch and is fighting battles with investors and lenders in India and abroad.

Earlier this week, Dutch-listed investment firm Prosus wrote off its 9.6% stake in Byju’s, recording a loss of $493 million in its annual report for FY24 and underscoring the edtech company’s continued financial struggle. It had invested more than $500 million in the company in what was its biggest bet on an edtech firm.

The cash-strapped Byju’s is in the middle of a $200 million rights issue, but has been barred from using any funds by the National Company Law Tribunal (NCLT). It has challenged the NCLT order at the Karnataka High Court.

The rights issue is being offered to existing investors at a 99% discount to the peak valuation of $22 billion. This valuation meltdown has irked investors who have tried to block the issue. Any investor not participating in the rights issue will see their holding in the firm wiped out at the conclusion of the current equity injection.

MCA Scrutiny

Byju’s came under the scanner of the MCA, regulators and probe agencies last year, particularly after the resignation of three directors and the auditor, Deloitte, over an inordinate delay in the announcement of its financial results, business processes and internal controls, among other issues.

The three directors include G V Ravishankar of Peak XV Partners (formerly Sequoia Capital India), Vivian Wu of Chan Zuckerberg Initiative, and Russell Dreisenstock of Prosus (formerly Naspers).

Subsequently, the MCA had in July 2023 ordered the inspection into Byju’s books by its regional director in Hyderabad to ascertain any potential corporate governance lapses. Officials had earlier told ET that a final call on whether the matter required to be referred to the Serious Fraud Investigation Office (SFIO) for further probe will depend on the RoC’s findings.

The Directorate of Enforcement had also reportedly asked the immigration bureau to issue a look-out-circular against Byju Raveendran so that he didn’t leave India without informing the investigation officer.