Mumbai: With the Enforcement Directorate (ED) allegedly finding ‘incriminating documents and digital data’ during its raids on residences and locations of BYJU’s and Co-Founder Byju Raveendran on Saturday in Bengaluru, all eyes are now on the enquiry surrounding the edtech giant.
BYJU’s, which is under the radar of ED, is being investigated over Foreign Exchange Management Act, 1999 (FEMA) violations as the company received over Foreign Direct Investment to the tune of Rs. 28,000 crore between 2011-2023, as per ED’s official statement.
“Further, the company has also remitted Rs 9,754 crore to various foreign jurisdictions during the same period in the name of overseas direct investment,” said the statement by the agency.
Edtech’s tumultuous state needs a cleanup, says investor
Though a report by Indian Brand Equity Foundation (IBEF) highlighted the potential of India’s edtech sector, which aims to be valued at $4 billion US dollars by 2025 from $750 US million dollars in 2020, consistent layoffs, dip in funding post the Covid-19 pandemic has made certain investors see the ED raids as being essential to clean up the edtech ecosystem.
“The ED raids were required as a fact of the matter is we can’t turn a blind eye to the problems within the edtech sector. The good guys don’t have to be afraid as there will be nothing to hide and they will not indulge in misselling, bad advertising practices, it’s the bad guys that need to be worried. Because of their malpractices, the edtech ecosystem cannot collapse,” stated Aniruddha Malpani, Founder, Malpani Ventures, who has been an angel investor for many edtech platforms.
“The Indian startup system has replicated a copy paste model of silicon valley which won’t be sustainable as we don’t have that kind of money to throw around,” added Malpani, who believes startups should continue their operations in India to be successful instead of keeping profits overseas.
Not all gloomy for stakeholders in startup space
According to Singapore-based financial media outlet DealStreetAsia, despite topping the global fundraising charts, Indian edtech companies saw a 40% drop in funding in 2022 at $2.5 billion dollars compared to $4.2 billion dollars in 2021.
Though a worrying trend in funding could imply that investors are looking the other way when it comes to the edtech space, the latter’s willingness to undertake reforms could change things around.
“Firstly, the edtech sector needs to have a clear and sustainable business model that can generate revenue and profit over the long term. This may require rethinking pricing strategies, product offerings, or other aspects of their business. Secondly, they need to be efficient and effective in their operations, minimising costs while delivering value to their customers. This may require streamlining processes, automating certain tasks, or outsourcing certain functions. Finally, they need to be transparent and open in their communication with stakeholders, including investors, employees, and customers,” stated Prashant Narang, Co-Founder, Agility Ventures, who added that edtech continues to be attractive for investment and termed instances such as raids on BYJU’s being ‘isolated’.
BYJU’s maintains commitment to its ethics post ED raids
Though time will tell to what extent BYJU’s will be impacted by the investigation into its overseas dealings, with it investing Rs 9,000 crores in its international acquisitions as per the mail by Raveendran addressed to his employees, the edtech unicorn has denied any wrongdoing.
“We have been completely transparent with the authorities and have provided them with all the information they have requested. We have nothing but the utmost confidence in the integrity of our operations, and we are committed to upholding the highest standards of compliance and ethics. We will continue to work closely with the authorities to ensure that they have all the information they need, and we are confident that this matter will be resolved in a timely and satisfactory manner. We want to emphasise that it is business as usual at BYJU'S. We are committed to delivering high-quality educational products and services to our customers across India and the world,” said an official statement by the BYJU’s legal team spokesperson.
