A group of Byju’s investors on Friday voted to remove the edtech group’s founder and chief executive Byju Raveendran and separately filed an oppression and management suit against the leadership at the firm to block the recently launched rights issue in a surreal moment for the startup, once India’s most valuable.
At an emergency general meeting (EGM) that concluded earlier today, a group of investors including Prosus Ventures and Peak XV Partners voted to change the leadership at the startup. The participating shareholders — whose combined ownership in Byju’s exceeded 60%, according to an investor source familiar with the matter — also passed the resolution to reconstitute Byju’s board. (Two people close to Byju’s disputed that participating shareholders held over 60% ownership in the firm. Neither of the sides have issued an official statement on the figures.)
Raveendran and other board members didn’t attend the EGM Friday. In a statement earlier this month, Byju’s asserted that its shareholders didn’t have the voting rights to enact leadership changes at the edtech group.
“At today’s Extraordinary General Meeting shareholders unanimously passed all resolutions put forward for vote. These included a request for the resolution of the outstanding governance, financial mismanagement and compliance issues at BYJU’s; the reconstitution of the Board of Directors, so that it is no longer controlled by the founders of T&L; and a change in leadership of the Company,” the shareholder group said in a statement, provided by Prosus, one of the largest investors in Byju’s.
“As shareholders and significant investors, we are confident in our position on the validity of the EGM meeting and its decisive outcome, which we will now present to the Karnataka High Court in line with due process.” Separately, four investors of Byju’s, representing about 25% ownership in the startup, earlier on Friday filed a suit at the National Company Law Tribunal on Friday to halt the rights issue.
The decision on Friday comes after more than a year of unrest among some of Byju’s largest investors, who assert that the $22 billion Indian edtech startup has played fast and loose with accountability.
In a statement on Friday, Byju’s questioned the legitimacy of the resolutions passed in the EGM, saying only a “small cohort of select shareholders” attended the meeting and termed their decisions “invalid and ineffective.”
Byju’s, which has raised over $5 billion to date, spent more than $2.5 billion in 2021 and 2022 on acquisitions alone. The startup, founded a decade ago, sought to go public in early 2022 through a SPAC deal that would have valued the Bengaluru-headquartered firm at about $48 billion. But as the market turned, Byju’s was forced to abandon its plan for the IPO.
Byju’s has been chasing new funding for more than a year. The startup was in the final stages to raise about $1 billion last year, but the talks derailed after the auditor Deloitte and three key board members (representatives of Prosus, Peak XV and Chan Zuckerberg Initiative) abruptly quit the startup.
Instead, Byju’s ended up raising less than $150 million in debt from Davidson Kempner and had to repay the investor the full committed amount after making a technical default in a separate $1.2 billion term loan B.
Late last month, Byju’s launched a rights issue where it sought to raise about $200 million at a massively discounted rate. Raveendran told shareholders earlier this week that the rights issue had been fully subscribed and requested all existing investors to participate and maintain their ownership.
“We have built this company together and I want us all to participate in this renewed mission. Your initial investment laid the foundation for our journey and this rights issue will help preserve and build greater value for all shareholders,” he wrote in the letter. “[…] I understand that participating in this rights issue may seem like a Hobson’s choice. However, this is the only viable option in front of us today to prevent permanent value erosion.”