The largest ed-tech company in India, BYJU’S, which has created one of the best and the most widely used school learning apps, was launched in 2015 to offer highly effective and personalized learning programs for schoolgoers as well as competitive exam aspirants.
BYJU’S has over 50 million registered students and is currently valued at around $8.4 billion. However, what was once an unstoppable force in the ed-tech market, empowering millions of students with its creative approach and soaring to spectacular heights, is now caught under a forex rule breach.
The platform is failing to thrive in the market, grappling with many issues, including corporate governance. The ed-tech firm issued a statement after being slammed with forex violations under the Foreign Exchange Management Act, 1999 (FEMA) rules by the ED (enforcement directorate).
In this article, we will delve into the forex rules and alleged violation of breaching forex by BYJU’S and explain the possible consequences that the ed-tech company may face.
Forex Rules and Alleged Violation
The Enforcement Directorate found alleged BYJU’S forex violations amounting to almost Rs 9000 crore earlier this month. The firm received the notice that the spokesperson at BYJU’S was dismissed. The firm has unequivocally denied the reports, insinuating that the company received no ED notice.
The queries involved in the notice were solely technical, such as delays in filing APR (annual performance report), and duly compliant ODI investments of nearly Rs. 1000 crores that came from the delayed audit FY 2022.
BYJU’S, however, has filed a much-needed intimation simultaneously for all its FDI received corresponding to the criteria in law and is not affected by the APR non-filing. BYJU’S was advised that the delayed APR filing is a technical problem, and the firm is confident about dealing with the case successfully.
On Tuesday, the ED found forex violations by the troubled BYJU’S ed-tech company that amounted to Rs. 9000 crore. The allegation followed a search-and-seizure operation by the ED at three different BYJU’S premises in Bengaluru.
India has laid down foreign investment rules to make the industry legal and regulated. SEBI regulates the Indian forex trading market through various guidelines and rules such as FEMA (Foreign Exchange Management Act), the Reserve Bank of India, and the SEBI Regulations, 2019.
To take part in forex investments, every individual or company needs to abide by the forex rules laid down by the authorities, as forex trading involves high risks of currency volatility, leverage risk, regulatory risks, and risk of fraud and scams. Breaking forex violations can lead to heavy fines and penalties in India, as discussed in the section below.
India’s most popular and valuable Bengaluru-headquartered ed-tech start-up BYJU’S claimed that it maintains compliance with the forex investment rules and has filed the requisite intimation for all the FDI it has received so far. Although the firm anticipates fines by the ED based on the “precedent actions,” it also believes their fines would be nominal.
Moreover, the notice sent by the ED does not denote any fines or penalties. Instead, it highlights the quantum of ODI/FDI that amounts to approximately Rs. 9000 crore, along with a few missed deadlines by the company. Forex breaches can significantly impact a forex brokers financial stability and reputation as well as disrupt the entire forex market.
Moreover, such breaches can also have significant long-term consequences, such as erosion of confidence and trust from customers and stakeholders, disruption of business processes as well as financial losses. Therefore, regulation of the forex investments and the foreign exchange market is necessary. The regulatory requirements for forex trading in India promote a fair and transparent market, protecting all participants, including dealers, brokers, and traders.
BYJU’S has denied all media reports insinuating the company’s forex violations. Although the ED has unearthed different incriminating documents along with digital data during its search-and-seizure operation that revealed the company received FDI worth Rs. 28,000 crore from 2011 to 2023, the CEO of BYJU’S, Raveendran, did not turn up during the investigation conducted by the ED.
This forex rule breach has yet again brought into the limelight the consequences that companies in India dealing with forex may face for violating forex rules. While the case is still going on, only time will tell what is in store for BYJU’S stakeholders.