India’s leading edtech startup, Byju’s, is facing a significant setback as it receives a show-cause notice from India’s Enforcement Directorate (ED), alleging violations of the nation’s foreign exchange rules. According to a reliable source, the ED plans to make these allegations public as early as Tuesday.
Violation of Foreign Exchange Management Act
The show-cause notice is expected to accuse Byju’s of violating rules under the Foreign Exchange Management Act (FEMA) amounting to a staggering $1.08 billion. The ED’s move comes after conducting a search operation at the startup’s premises in late April, during which they claimed to have seized incriminating documents and digital data.
Byju’s Remains Confident
Byju’s, headquartered in Bengaluru, has expressed confidence in its compliance with all local laws. They stated that they are yet to receive an official notice from the ED. Despite this assurance, the allegations from the ED pose a significant threat to the once-valued $22 billion startup.
A Series of Challenges for Byju’s
This latest allegation adds to the series of challenges Byju’s has faced in recent months. The edtech giant missed its revenue target for the previous financial year, and its delayed accounts revealed this information just a few weeks ago. Furthermore, the startup witnessed the departure of its CFO Ajay Goel, as well as the sudden exit of its auditor Deloitte and three key board members.
Backlash from Prosus
Prosus, one of Byju’s early backers and holding more than 9% of its shares, publicly criticized the startup in July. They accused Byju’s of not evolving adequately and disregarding the advice and recommendations provided by the investor. Such backlash from a prominent investor further compounds the challenges faced by the Bengaluru-based edtech company.
As the show-cause notice looms over Byju’s, the company’s future hangs in the balance. It remains to be seen how Byju’s will navigate these allegations and restore stability in the face of mounting obstacles.