Byju's Investors Seek Ouster of Founders, Citing Concerns About Governance and Finances

2 Feb 2024 , 12:11 PM

A few days after Byju’s initiated a rights offer to raise $200 million from current shareholders, investors in the beleaguered edtech startup are attempting to remove Byju Raveendran’s senior executives, citing their ‘deep concerns’ about the health of the company going forward.

The investors want an extraordinary general meeting (EGM) to approve resolutions regarding unresolved governance, financial mismanagement, and compliance issues; they also want the company’s leadership to change and the Board of Directors to be reconstituted without the founders of Byju’s parent company Think & Learn controlling it.

After several members left the board last year, Byju Raveendran, the company’s founder and CEO, his brother Riju Ravindran, and co-founder and wife Divya Gokulnath currently make up the board.

According to sources, Prosus, Peak XV, Sofina, Lightspeed, and General Atlantic are all represented in the statement.

They are sending out an EGM notification for the third time. An individual with knowledge of the developments stated, ‘They don’t have the authority to enforce an EGM.

Six of the approximately 80 investors listed on the company’s cap table have indicated that they would take part in the rights issue, the same individual said.

Raveendran notified the shareholders in a letter dated 29 January that the board had decided to use the rights issue method to raise cash.

In order to reach operational break-even in the next two to three months, Byju’s has lowered the monthly burn rate of its main business to Rs 50 crore, according to a source close to the events. Furthermore, following the conclusion of the FY23 audit, the company intends to reassemble the Board.

The founder continued to compare the company’s troubles to those portrayed in William Ernest Henley’s poem ‘Invictus’ in the letter to stockholders, saying, ‘In the fell clutch of circumstance I have not winced nor cried aloud.’ My head is bleeding yet unbowed under the blows of chance.’

‘We think a quick capital offering will give the business the funds it needs to grow and repair. This will be utilised to manage responsibilities, carry out business operations, and strengthen the company’s sustainability,’ Raveendran stated in the letter.

This occurs after Byju’s investors had downgraded the company’s valuation several times in the last year. Byju’s was valued at less than $3 billion in November 2023 after tech investor Prosus reduced the value of its interest in the company. This represents an 86 percent fall from the $22 billion previous estimate.

BlackRock, a worldwide investment management organisation that owns less than 1% of Byju’s, recently reduced the edtech company’s worth from its peak of $22 billion in early 2022 to $1 billion.

The board of the company, according to Raveendran, feels that raising cash is essential to generating significant shareholder value.

In addition, he said, ‘This capital raise is essential to equip the company with necessary resources to deliver on its mission and to prevent any further value impairment.’

Indeed, the business has been attempting to raise capital for a round of funding for more than a year. The edtech behemoth is currently experiencing a severe financial issue, and its auditors are expressing doubts about its ability to operate as a going concern over the course of the next 12 months. This coincides with the fundraising efforts.

‘We have trimmed our burn and worked to become a lean organisation, razor-focused on execution, during the 21 months since our last external capital raise,’ stated Raveendran.

In the past 12 months, the company has let go of thousands of workers as it has struggled with dwindling venture capital funding and a weakening market for online learning services. Members of its investor board have now departed as well, citing disagreements with Raveendran.

Since then, the business has made an effort to address a few of the issues. Ranjan Pai, one of its original investors, contributed funds, established an advisory board comprising industry experts like Mohandas Pai and Rajnish Kumar, and promoted Arjun Mohan to CEO. Talks about selling off assets like Epic and Great Learning are also underway.

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