India’s Enforcement Directorate, its crime-fighting agency, has issued a show-cause notice to Byju’s, accusing it of violating the nation’s foreign exchange rules.
The ED’s allegations say that the Bengaluru-headquartered startup has violated rules under the Foreign Exchange Management Act (FEMA), to the tune of $1.12 billion, by failing to submit documents of imports against advance remittances and proceed of exports made outside India and delayed filing of documents for foreign direct investment received by the startup. TechCrunch reported about the impending show-cause notice earlier Tuesday.
In a press statement (PDF), the Indian agency said “various complaints regarding the foreign investment received by the company” prompted it to launch a probe.
The show-cause notice follows the agency searching the premises of Byju’s and its founder Byju Raveendran in late April. At the time, the agency said it had found and seized “incriminating” documents and digital data at the firm’s premises.
“On conclusion of the investigation, it was found that Think & Learn Private Limited & Byju Raveendran have contravened the provisions of FEMA by failing to submit documents of imports against advance remittances made outside India, by failing to realize proceeds of exports made outside India, by delayed filing of documents against the Foreign Direct Investment (FDI) received into the company, by failing to file documents against the remittances made by the company outside India and by failing to allot shares against FDI received into the company,” the Indian agency said Tuesday evening.
Byju’s said at the time that it was confident that the Enforcement Directorate will find that the startup, once valued at $22 billion, is in compliance with all local laws. In a statement earlier Tuesday, a Byju’s spokesperson said the startup hadn’t received a notice from the ED.
The ED’s show-cause notice is the latest headache for the Bengaluru-headquartered startup, which has spent the last six months correcting several mistakes.
The startup, backed by Prosus, Peak XV, Sofina, BlackRock, UBS and Chan Zuckerberg Initiative, missed its revenue target for the financial year ending in March last year, the startup disclosed in a much-delayed account this month.
Byju’s CFO Ajay Goel left the startup to return to Vedanta late last month, following high-profile and abrupt departures of auditor Deloitte and three of Byju’s key board members in June. Prosus, which owns more than 9% of Byju’s and is one of its earlier backers, publicly slammed the Bengaluru-headquartered startup in July for not evolving sufficiently and disregarding the investor’s advice and recommendations despite repeated attempts.
The ED has widened its crackdown over foreign exchange violations in the past one and a half years. It accused Andreessen Horowitz-backed crypto exchange CoinSwitch of violating similar rules last year.