A section of BYJU’S investors sought Raveendran’s ouster as CEO but no decision has so far been made
Investors grilled the founders and the top management on the ongoing troubles at the startup and sought the disclosure of pro-forma financials of the company
The EGM was just to update shareholders about the recent changes to the firm’s auditor and a planned restructuring of the businesses, said a person close to BYJU’S CEO
As edtech decacorn BYJU’S wades through a rough patch, it seems that the founder and chief executive officer (CEO) Byju Raveendran himself has been caught in the crossfire.
At the extraordinary general meeting (EGM) called on Tuesday (July 4), a section of the startup’s investors reportedly sought the ouster of Raveendran to make space for a new interim CEO.
However, two investors told Inc42 that no such discussion took place during the EGM.
“The demand was made for him to step away till the time the dust settles down on the court cases and there is clarity on the financials for the last two years (FY22 and FY23). However, since not all investors supported that idea and since the family also holds a significant stake, the decision could not be made,” a source told Livemint.
A lot transpired at the EGM as stakeholders grilled the founders and the top management about the ongoing troubles at the startup and sought clarifications about the utilisation of funds and disclosure of pro-forma financials of the company.
People familiar with the development said that the investors sought further information on the ‘end use’ of the $910 Mn (part of the $1.2 Bn Term Loan B) as the status of the funds was not clear in BYJU’s account books. The concerns were prompted as many investors claimed that they were not receiving their monthly management information system (MIS) reports from the edtech major.
“The company did not provide any MIS to its investors. That has also been one of the key contentions,” the source added.
Raveendran was also pulled up by the shareholders over multiple issues plaguing the company. Besides, the company also briefed the shareholders on the recent debt raise of its offline coaching arm, Aakash.
A source close to BYJU’S CEO rubbished the report saying that ‘some small shareholders’ were curious about the end use of the TLB funds, adding that some bond-holders also want access to the TLB data.
However, the person noted that the promoters were not obliged to do so and that the EGM was just to update shareholders about the ‘recent changes in the firm’s auditor and a planned review-cum-restructuring of the businesses.’
“The capital (raised via TLB) is there and is meant to be used for acquisitions. Further details cannot be disclosed at the moment, and this has been conveyed to the bond-holders and shareholders” the person close to Raveendran added.
BYJU’S Sea Of Troubles
The developments come close on the heels of a slew of issues that have gripped the company in the recent past. Last month, Deloitte Haskins and Sells resigned as the auditor after serving the company for more than six years. The firm cited multiple delays and non-responses from Raveendran on conducting the FY22 audit.
In quick succession, three key board members, including Peak VX Partners’ (formerly Sequoia Capital India) GV Ravishankar, Chan Zuckerberg Initiative’s Vivian Vu, and Prosus’ Russell Dreisenstock, put in their papers. Curiously, Raveendran, his wife Divya Gokunath and brother Riju Raveendran remain the only serving members on the board now.
However, the biggest bone of contention appears to be BYJU’S mounting losses, which soared nearly 20X YoY to INR 4,588 Cr. As the funding winter emerged on the horizon early last year and the capital became scarce, the company undertook a slew of cost-cutting measures which included laying off nearly 5,000 employees and putting its expansion plans somewhat on hold.
Amid this, the company is yet to file its financial statements for FY22 and FY23, which has further invited the ire of investors. Then, there have been regulatory skirmishes with authorities, which have seen ED sleuths raid the premises linked to the company for alleged foreign exchange violations. The company was also slammed by the children’s body NCPCR for mis-spelling its courses.
Brewing alongside have been multiple legal cases and a potential debt crisis for BYJU’S. The company last month stopped payments to its TLB lenders and dragged one of its TLB lenders to the New York Supreme Court.
Reports also recently surfaced that the company’s brand ambassador Shah Rukh Khan was unlikely to renew his endorsement contract, owing to the ongoing troubles at the company.
With things at India’s most valuable startup not looking so good, shareholders seem to be extra jumpy. This has been especially visible as many investors such as BlackRock and Prosus have slashed the valuation of the startup on their books.
With much at stake, it remains to be seen how BYJU’S manoeuvres the storm even as its boat wades further deeper into choppy waters.