BYJU’S The well-known ed-tech startup. Is currently facing a period of uncertainty due to demands from investors for the removal of its founder and CEO. Byju Raveendran. This situation has arisen primarily due to ongoing court cases and financial uncertainties. Additionally, concerns regarding fund utilization and a lack of disclosure have added strain to the relationships between BYJU’S and its investors. It is worth noting that the company has mounting losses and regulatory issues. And unresolved legal cases are all contributing factors to the challenges currently being faced by India’s most valuable startup.
In the midst of turbulent times, edtech decacorn BYJU’S finds itself in a precarious situation, with its founder and CEO Byju Raveendran caught in the crossfire.
An extraordinary general meeting (EGM) held on Tuesday (July 4) witnessed a group of investors pushing for Raveendran’s removal, suggesting the appointment of a new interim CEO until the ongoing court cases and financial uncertainties surrounding the last two fiscal years (FY22 and FY23) are resolved.
However, due to the lack of unanimous support from investors and the significant stake held by Raveendran’s family, no decision was reached.
The EGM unfolded as stakeholders interrogated the founders and top management about the company’s prevailing troubles, seeking clarifications regarding fund utilization and the disclosure of pro-forma financials.
Concerns were raised by investors who claimed that they were not receiving monthly management information system (MIS) reports from BYJU’S, prompting them to question the “end use” of the $910 million portion of the $1.2 billion Term Loan B. The status of these funds remained unclear in BYJU’S account books, and the absence of MIS reports became a key contention point.
Shareholders also scrutinized Raveendran over multiple issues plaguing the company. Additionally, the company updated shareholders on the recent debt raise of its offline coaching arm, Aakash.
However, a source close to Raveendran dismissed the report, attributing the concerns to the curiosity of “some small shareholders” about the TLB funds’ end-use. The source stated that some bondholders also sought access to the TLB data, but emphasized that the promoters were not obliged to disclose further details. The purpose of the EGM was to provide shareholders with updates on recent changes in the firm’s auditor and plans for a review-cum-restructuring of the businesses.
BYJU’S has been grappling with a series of issues in recent times. Last month, Deloitte Haskins and Sells resigned as the auditor after serving the company for over six years. The firm cited multiple delays and non-responsiveness from Raveendran in conducting the FY22 audit.
Subsequently, three key board members, including GV Ravishankar from Peak VX Partners (formerly Sequoia Capital India), Vivian Vu from Chan Zuckerberg Initiative, and Russell Dreisenstock from Prosus, resigned. Presently, Byju Raveendran, his wife Divya Gokunath, and his brother Riju Raveendran are the only remaining members of the board.
The most significant bone of contention appears to be BYJU’S mounting losses, which skyrocketed nearly 20 times year-on-year to INR 4,588 crore. As the company faced a funding winter and capital became scarce, it implemented cost-cutting measures, including laying off nearly 5,000 employees and halting some expansion plans.
Moreover, the company has yet to file its financial statements for FY22 and FY23, further exacerbating investors’ concerns. Regulatory issues have also arisen, with ED (Enforcement Directorate) officials conducting raids on premises linked to the company for alleged foreign exchange violations. BYJU’S has faced criticism from the National Commission for Protection of Child Rights (NCPCR) for misspelling its courses.
Amidst these challenges, the company is entangled in multiple legal cases and potentially faces a debt crisis. Last month, BYJU’S ceased payments to its Term Loan B lenders and took one of its lenders to the New York Supreme Court. Reports have recently surfaced suggesting that the company’s brand ambassador, Shah Rukh Khan, is unlikely to renew his endorsement contract due to the ongoing troubles at the company.
With the outlook for India’s most valuable startup appearing bleak, shareholders are growing increasingly restless. This unease is evident as investors such as BlackRock and Prosus have slashed the company’s valuation on their books. With so much at stake, BYJU’S faces the daunting task of navigating through the storm as its boat ventures deeper into treacherous waters.
