BYJU’S Crisis: Edtech Startup Says Investors Don’t Have Right To Vote On CEO Change

Amid the ongoing standoff with its investors, troubled edtech giant BYJU’S on Friday (February 2) said that its shareholders’ agreement does not give the right to investors to vote on change of the chief executive officer (CEO) or the management of the startup.

The development came a day after some of BYJU’S investors called for an extraordinary general meeting (EGM) to reconstitute its board and change its leadership.

“… we would emphasise that the shareholder’s agreement does not give them the right to vote on CEO or management change,” the company said in a statement.

Earlier, in an internal note to its employees, BYJU’S accused the investors of conspiring to oust founder and group CEO Byju Raveendran at a time of crisis.

Currently, BYJU’S board comprises Byju Raveendran and his family members Divya Gokulnath and Riju Raveendran. Last year, three of its board members – Russell Dreisenstock of Prosus, Chan Zuckerberg Initiative’s Vivian Wu, and Peak XV Partners’ GV Ravishankar resigned. 

Later, BYJU’S, along with its advisory board comprising Rajneesh Kumar and Mohandas Pai, constituted a working group with the investors to find a constructive way to move forward. 

In its latest statement, BYJU’S said it will move ahead with its $200 Mn rights issue, which it is conducting at a steep 99% valuation cut.

“The criticality of the rights issue has been shared with all shareholders, with capital being pivotal for a successful turnaround. Unfortunately, the company and our employees are paying the price for a stand-off triggered by some investors. Business continuity is essential, and we shall prioritise this in our actions,” the company said.

In the internal mail sent to the employees, the company attributed the delay in disbursing the salaries to employees this month to an “artificially induced” crisis by select investors. 

However, BYJU’S said it would continue to seek dialogue to resolve all the issues. 

It also claimed that Think & Learn has been “turning around the business, cutting the monthly burn to near operational breakeven and working on an AI-led technological refresh”. 

The EGM resolution by investors adds to the troubles of BYJU’S which has been fighting on multiple fronts over the past year or so. It continues to be plagued by a host of troubles, including the exit of board members, layoffs, delay in filing financial statements, growing losses, scrutiny of the Enforcement Directorate (ED), and a legal battle with the Board of Control For Cricket in India (BCCI). 

Earlier today, Inc42 reported that IT services company Surfer Technology Private Limited has filed an insolvency plea against BYJU’S at the National Company Law Tribunal (NCLT). Meanwhile, BYJU’S Alpha, the US subsidiary of the beleaguered startup, has filed for Chapter 11 bankruptcy proceedings in the court of Delaware.

BYJU’S consolidated net loss surged 81% to INR 8,245.2 Cr in the financial year 2021-22 (FY22) from INR 4,564.3 Cr in FY21.

The Bengaluru based company has been fighting on multiple fronts over the last year or so. It continues to be plagued by a host of troubles, including the exit of board members, layoffs, delay in filing financial statements, growing losses, scrutiny of the Enforcement Directorate (ED), and a legal battle with the Board of Control For Cricket in India (BCCI). 

BYJU’S has even filed for Chapter 11 bankruptcy proceedings in the court of Delaware via its US subsidiary, BYJU’S Alpha, listing liabilities in the range from $1 Bn to $10 Bn.

Earlier this month, BYJU’S filed its financial statements for FY22 almost 22 months after the end of the year. Its consolidated net loss surged 81% to INR 8,245.2 Cr in FY22 from INR 4,564.3 Cr in FY21. Operating revenue rose over 120% year-on-year to INR 5,014.6 Cr during the year under review, mostly on the back of improvement in the financial performance of Aakash. 

In the financial statement, the startup’s auditor also flagged concerns regarding its continuing net losses from operations and accumulated losses and the outcome of the litigation of the $1.2 Bn Term Loan B availed by Byju’s Alpha Inc.