A group of key shareholders at Byju’s, collectively holding more than 30% stake, have issued a notice to the cash-strapped edtech firm calling for an extraordinary general meeting (EGM) to address “persistent issues” in the latest instance of the widening rift between the startup’s investors and founder Byju Raveendran.

These shareholders will vote to oust Byju’s CEO Raveendran and his family members from the board in an attempt to restrain them from running the operations at the once-storied edtech startup, people in the know said.

They, however, added that the investors have been unsuccessfully pushing this proposal for several months as the company’s financial troubles worsened.

The current board of Think & Learn comprising Raveendran, his wife and cofounder of Byju’s Divya Gokulnath and his brother Riju Ravindran has been seen as a glaring governance lapse by existing shareholders in the online education platform, said the people cited above.

Raveendran and family own about 26% in the firm.

A joint investor statement signed by South Africa’s Prosus, Peak XV Partners (formerly Sequoia Capital), General Atlantic, Sofina, The Chan Zuckerberg Initiative, Owl Ventures, Sand Capital, is the first instance of shareholders banding together to seek a change of guard in the company.“The request for an EGM is supported by a consortium of Think & Learn (T&L) shareholders and follows earlier notices of requisition sent to the T&L Board of directors in July and December 2023, which were disregarded…The resolutions being put forward for the EGM to consider include a request for the resolution of governance, financial mismanagement and compliance issues; 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 investor group said in a statement on Thursday.“The issuance of this EGM notice follows many months of continued efforts by shareholders to engage with the company to address persistent issues relating to corporate governance, mismanagement and compliance. These efforts have been ongoing following the resignation from the board in June 2023 of directors nominated by Prosus and other shareholders,” the statement said.

Top shareholders in Byju's_FEB 2024_Graphic_ETTECH

“We are deeply concerned about the future stability of the company under its current leadership and with the constitution of the board,” the investors said.

For any resolution to pass at the EGM, it will need to muster support of a majority of the shareholders.

The people cited above said the investors are planning to have a new management and board at Byju’s to steer the company forward if they win the required votes.

Former State Bank India chairman Rajnish Kumar and ex-Infosys CFO Mohandas Pai are a part of Byju’s board advisory council, which was formed in July after the resignation of board representatives from Prosus, Peak XV and Chan Zuckerberg Initiative.

On January 29, Byju’s issued a notice to investors for floating a rights issue, likely to be priced at a 99% cut to the company’s previous peak valuation of $22 billion.

If successful, the rights issue will value the firm at $225 million–post-money. ET reported on January 31 saying a rights issue at such a low price will lead to a reset of the cap table if any investor decides not to subscribe to the share sale and wipe their stakes completely.

Investors like Prosus , Peak XV need to pump in $18 million and $14 million, respectively or they will virtually see their holding wiped off.

Byju’s has missed multiple deadlines to present its audited financials for FY22 to investors and is running against time to close the audit.

Byju’s CFO Nitin Golani has informally briefed investors on its earnings but investors are insisting on seeing the audited numbers.

Byju’s reported an operating revenue of Rs 5,014 crore in FY22 on a loss of Rs 8,245 crore.

US lenders of $1.2 billion term loan B have also dragged the firm of National Company Law Tribunal (NCLT) to initiate insolvency proceedings against it.

Prosus, which is not an investor in Byju’s owned Aakash Institute, also sent a legal notice to Manipal group chairman Ranjan Pai, who is now a 40% shareholder in the coaching centre company.

The legal notice may not itself lead to a change in the shareholding of Aakash but indicates the increasingly straining relations between Raveendran and shareholders.

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