Byju’s Key Shareholders Call for EGM, Seek Change of Guard With Vote to Oust Founder Raveendran

This comes days after Byju's launched a rights issue to raise $200 million from existing shareholders.

New Delhi: A consortium of key Byju’s shareholders, collectively holding a stake of over 30% in the ed-tech company, has called for an extraordinary general meeting (EGM) with the objective of ousting Byju Raveendran and his family members from the board.

This is the “third time the investors are issuing an EGM notice. They don’t have the rights to enforce an EGM,” a person close to the developments told moneycontrol.

The EGM is being called to reconstitute the board of directors, so that it is no longer controlled by the founders of Byju’s parent company, Think & Learn (T&L), the Economic Times reported.

In a joint statement, released on February 1 (Thursday), the shareholders said that such notices of requisition were sent to the T&L board of directors in July and December 2023 as well, which were disregarded.

The investors want to address governance concerns, financial mismanagement and compliance issues at the startup.

These shareholders include South Africa’s Prosus, Peak XV Partners (formerly Sequoia Capital), General Atlantic, Sofina, The Chan Zuckerberg Initiative, Owl Ventures and Sand Capital. And, this is the first instance these shareholders have come together to seek a change of guard in the company, ET reported.
This comes days after Byju’s launched a rights issue to raise $200 million from existing shareholders.

A rights issue is a way for a company to raise capital by offering existing shareholders the opportunity to buy additional shares at a discounted price, typically in proportion to their existing holdings.

Byju’s rights issue is likely to be priced at a 99% cut to the company’s previous peak valuation of $22 billion.

At such a low price, if existing shareholders do not participate in the rights issue, they will see their ownership stake in the company diluted.

So, investors like Prosus and Peak XV need to pump in $18 million and $14 million, respectively, or they will virtually see their holding wiped off, the Economic Times reported.

In the EGM, the 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 edtech startup, people in the know told ET.

Raveendran and family own about 26% in the firm.

“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.

After missing multiple deadlines, Byju’s finally submitted its financial statements for fiscal year 2022. The edtech giant’s losses more than doubled to Rs 8,245 crore in FY22 from Rs 4,564 crore a year ago.

Its total financial liabilities increased to Rs 17,678 crore in 2021-22, up from Rs 3,116 crore in 2020-21.

The losses were mainly driven by Whitehat Jr., a startup focusing on online coding classes for kids, and Osmo, a children’s educational gamemaker, per news reports.

Separately, the American arm of Byju’s has filed for bankruptcy after defaulting on debt of $1.2 billion, Mint reported.

Alpha Inc.’s court-appointed CEO Timothy Pohl initiated Chapter 11 insolvency proceedings in a Delaware court saying that the company lacked funds to defend itself against litigation, as per court documents reviewed by Mint.