Education startup Byju’s, one of India’s leading startups, has reportedly failed to pay $40 million in interest due on a $1.2 billion loan, escalating a conflict with its lenders. Sources with knowledge of the matter confirmed the non-payment. Byju’s has filed a complaint regarding the loan with the New York Supreme Court.
Byju’s had been engaged in negotiations to restructure the loan after facing financial challenges caused by the waning demand for online tutoring during the pandemic. However, the talks fell apart when creditors demanded an accelerated repayment.
The company stated that, due to ongoing legal proceedings in Delaware and New York, it will withhold further payments, including interest, to the loan lenders until the dispute is resolved by the court. Byju’s referred to the $1.2 billion term loan B as the subject of dispute.
As of June 5, the payment had not been made, and some lenders are reportedly exploring options to address the potential default. The loan’s value has dropped to 64.375 cents on the dollar from 78 cents on June 2.
Byju’s, led by founder Byju Raveendran, experienced previous setbacks such as missing financial filing deadlines and being investigated for foreign-exchange policy violations. Despite these challenges, the company grew into India’s most valuable startup over the past decade, fueled by the surge in online education demand and strategic acquisitions.
Investors, including Tiger Global Management, Mark Zuckerberg’s Chan Zuckerberg Initiative, Silver Lake Management, and Naspers Ltd, contributed to Byju’s success. The company was valued at $22 billion and had considered going public through a merger with a special-purpose acquisition company (SPAC) last year.
Byju’s emphasized that its decision not to make interest payments does not reflect financial difficulties, asserting its financial strength and significant cash reserves. The company expressed its willingness to continue discussions with the loan lenders.
The default on the interest payment by Byju’s and the subsequent dispute with lenders have raised concerns about the future of the prominent Indian startup in the online education sector.
