Byju Raveendran
Beleaguered edtech company Byju’s, founded by former math tutor Byju Raveendran, is mired in all sorts of challenges. Recently, its valuation was slashed from a peak of $22 billion to $5.1 billion, resulting in Raveendran losing his billionaire status. Earlier in June, its auditor Deloitte resigned over delays in finalizing its financial statements and three board members resigned en masse. Now, it’s facing fresh fire from investors.
Netherlands-based Prosus (formerly Naspers) and Peak XV Partners (formerly Sequoia India) have slammed Byju’s for not ramping up corporate governance and for disregarding suggestions made by board members.
In a scathing media statement released on Tuesday, Prosus said that “BYJU’S grew considerably since our first investment in 2018, but, over time, its reporting and governance structures did not evolve sufficiently for a company of that scale.”
It added that “despite repeated efforts from our director, executive leadership at BYJU’S regularly disregarded advice and recommendations relating to strategic, operational, legal, and corporate governance matters.”
The release noted that Russell Dreisenstock, a Prosus representative on Byju’s board stepped down “after it became clear that he was unable to fulfil his fiduciary duty to serve the long-term interests of the company and its stakeholders.”
Prosus however, reiterated its commitment to the Indian market where it has invested in dozens of companies over two decades. It also added, “We continue to believe in the potential of BYJU’S and its role in revolutionising access to quality education in India and around the world.”
Meanwhile news reports noted that Peak XV had written to its limited partners last week indicating that it would be marking down its investment in Byju’s due to lack of financial visibility.
Peak XV’s managing director G.V. Ravishankar, who had resigned from Byju’s board in June, did not respond to calls seeking a comment and the Peak XV’s corporate communications department refused to provide a comment on the subject. Peak XV had reportedly stated in the letter to its limited partners that Ravishankar’s resignation was instigated by Byju’s refusal to improve transparency despite continuous pleas by investors.
“It’s very natural for an investor director to step down if advice he provides on the board is disregarded,” says Ganesh Natarajan, chairman of digital consulting and investment company 5F World. “It’s unfortunate though for the reputation of the company. I look forward to Byju’s building a robust business in the future with the highest standards of governance.”
A Byju’s spokesperson said, “we have noted the observations of our valued investors. We have updated our shareholders about definitive steps taken to improve corporate governance and financial reporting.”
The Bangalore company still hasn’t filed its financial results for the year ended March 31, 2022. It did not have a chief financial officer from December 2021 to April 2023 – even though it had vice presidents of finance for its different divisions.
The last available results were for the fiscal year ended March 31, 2021. Even this was published only in September 2022 — after a 12-month delay. Byju’s reported a loss of 45.6 billion rupees ($573 million) — up from 3.1 billion rupees the previous year. Revenue fell 3% to 24.3 billion rupees in the same period.
Meanwhile, earlier this month, Byju’s created an advisory council that would assist and mentor the board. Members include former chairman of Indian banking behemoth State Bank of India, Rajnish Kumar, and former CFO and director of IT giant Infosys, TV Mohandas Pai.
In June, Vivian Vu, representing the Chan Zuckerberg Initiative, had also resigned along with Dreisenstock and Ravishankar. The company said that the directors resigned because their holdings fell below the required threshold. But the investors have now confirmed that the real reason was the differences they had with the management.
Amid this fracas, a group of lenders said in a statement on Monday that a consortium of creditors and Byju’s have agreed to work towards a “signed and completed” term loan amendment before August 3. This is regarding a $1.2 billion loan that was availed by the company in November 2021 to fund its acquisitions. This amendment is expected to end all legal entanglements and avoid enforcement actions vis a vis the loan.