Robin Raina’s Ebix goes broke; files for bankruptcy, what went wrong?

Indian-American engineer and entrepreneur Robin Raina’s technology firm Ebix Inc has filed for bankruptcy under Chapter 11 in United States’ Texas, according to several media reports.

The Nasdaq-listed company has filed for bankruptcy protection in the United States Bankruptcy Court, Northern District of Texas in the United States.

The technology company’s CEO Robin Raina,56, joined its former avatar, Delphi Information Systems Inc. founded in 1976 by Ken Bitticks in Atlanta, Georgia as Vice President in 1997 and was elevated to Chief Operating Officer in 1998 and eventually assumed the role of CEO in September 1999.

"Pursuant to the Agreement, the Agent and the Lenders have agreed that, during the period from the Existing Forbearance Effective Date (as defined in the Agreement) to the earlier of (x) 11:59 p.m. New York City time, on December 17, 2023, and (y) the date on which any termination event, as set forth in the Agreement, has occurred, the Lenders will forbear from exercising any of their respective rights and remedies with respect to certain specified defaults and event of defaults as set forth in the Agreement," Ebix was quoted in the Securities and Exchange (SEC) disclosure.

The company’s largest chunk is held by Raina himself, with some of the major shareholders including Blackrock, Vanguard Group, State Street Corp, and Invesco.

As per a Bloomberg report, Ebix’s multiple subsidiaries have filed for bankruptcy as well, with their advisors conducting a “fulsome marketing and sale process” for the company’s assets.

Ebix and Raina have been granted multiple extensions for repayment since 2021, with the deadline expired as of today. The Texas court will reportedly hear the case on December 19.

The company has a debt of $360 million in principal amount, which had to be cleared on December 17 after the Raina-owned company sought a conditional extension, failing which bankruptcy proceedings would begin.

Ebix missed its December 17 deadline to pay debtors after multiple forbearances over the last few months, and it looks unlikely if the company will be able to meet its payback requirements, reports suggest.

The development was not reported on US exchange Nasdaq.

The lenders, as per the contract, will move court with the bankruptcy proceedings against the company as per the agreement for extension last month.  

Ebix had reported $119 million in revenue while its losses stood at $10 million during the third quarter ending September.

Ebix was aggressively tapping public markets for capital, with their Indian arm EbixCash filing for its draft red herring prospectus (DRHP) with the Security Exchange Board of India (SEBI) in early 2022 for Rs 6,000 crore IPO.

This year April, the IPO received SEBI’s nod and the company was expected to list sometime in the middle of 2023, but the company had not declared the Singapore case hearing which burnt a hole worth Rs 100-200 crore in Ebix’s pocket.

In the third quarter of 2023, Ebix’s generally accepted accounting principles (GAAP) operating income fell by 32.4 per cent year-on-year to $20.5 million. The decline was pinned on certain one-time increased expenses related to credit agreement and the IPO marketing expenses for EbixCash.

“These are difficult times for the Company. In spite of that, the company’s operating results after excluding the one-time items are consistent with our expectations,” Raina was quoted saying earlier.

However, EbixCash is profitable with their net profit up 55 per cent to Rs 751.3 crore in FY23, from Rs 482 crore last year.

Ebix Inc. saw an 80 per cent nosedive since July 2023 amid their legal soup, and on Monday the stock was dropped from the S&P Software and Services Select Industry Index.

The law firm Sidney Austin LLP has been assigned as bankruptcy counsel, while Jefferies LLC will act as the investment banker to the proceedings, according to a December 17 filing for bankruptcy.

Hindenburg Research had criticised Ebix in 2022, describing their Indian unit as a “house of cards.”

Ebix had termed the allegations as malicious, saying accountants from Alix Partners reviewed issues related to the unit’s gift card business and that Ebix’s board was satisfied that “no steps were necessary", as per Bloomberg reports.

Ebix won a temporary restraining order against Hindenburg, Google and Twitter in 2022 forbidding the republication of the report in India.