Byju's Denies Siphoning Off Funds, Confirms $533 Million With Non-US Subsidiary

⁠The company alleged that “in an attempt to extract better and unbargained-for terms, the lenders accelerated the loan in March 2023"

The edtech major Byju's, clarified on Tuesday that no funds have been siphoned off, and approximately $533 million are presently held in a wholly-owned non-US subsidiary of the company. The company stated that US-based hedge fund manager Camshaft Capital no longer manages the funds, which are part of a $1.2 billion Term Loan B (TLB). Byju's Alpha, a US unit of Byju's, transferred the $533 million to another wholly-owned US-based subsidiary of Byju's, as disclosed in court filings by Camshaft. 

Byju's had borrowed from certain US-based lenders in November 2021, and for this purpose, a special purpose vehicle (SPV) named Byju's Alpha was established in Delaware.

“Byju’s Alpha was never an operating company. Its sole role was to receive the funds and then disburse them through the group. ⁠Under the loan agreement, there is no restriction on the use of funds, except that for regulatory reasons, the funds cannot be brought to India,” the edtech firm said.

⁠The company alleged that “in an attempt to extract better and unbargained-for terms, the lenders accelerated the loan in March 2023.”

The company additionally contended that the lenders based their actions on fabricated non-monetary "events of default," such as the failure of one of Byju's Indian subsidiaries, Whitehat, to comply with the loan agreement as an additional guarantor. “That is the case even though it had become legally impossible for Whitehat to provide the additional guarantee due to amendments to certain RBI regulations that came into effect in August 2022.”

This matter is presently under dispute in the New York Supreme Court and the Delaware Supreme Court.

Meanwhile, Byju's, led by Byju Raveendran, accused that the "lenders took control over Byju’s Alpha by purporting to replace Byju’s nominee with their own designee." The company, which is yet to pay salaries to its more than 20,000 employees for February, disclosed that in early 2023, the funds were transferred from Byju’s Alpha to Inspilearn, another US-based wholly-owned subsidiary. 

Subsequently, Inspilearn moved those funds from Camshaft to a non-US-based fund. “More recently, and on receipt of advice from counsel, those funds have been transferred from Inspilearn to a non-US based 100 per cent subsidiary of Byju’s,” said the company.