Lack of transparency prompted board exit, says Byju's shareholder Peak XV

Byju's defers appraisals

Peak XV Partners (formerly Sequoia Capital India) sent a letter over the weekend to its Limited Partners (LPs), explaining the rationale behind GV Ravishankar's resignation from the board of Byju's, India's highest-valued startup, according to information from at least three individuals familiar with the situation, told Moneycontrol.

The investor, which is the second-biggest institutional shareholder in Byju’s, told LPs that Ravishankar’s move to step down from Byju’s board was due to lack of transperancy in providing business updates and information to investors, the people said, requesting anonymity. Byju’s leadership was also unwilling to follow the advice and suggestions related to corporate governance, legal and operational matters put forth by former board member Ravishankar. Peak XV told LPs that Ravishankar wasn’t able to discharge his fiduciary duties as an investor and a board member.

LPs are investors in venture capital funds. In the case of Peak XV, a majority of the VC’s LPs are based in the US and include university and hospital endowment funds. Queries sent to Byju’s and Peak XV did not elicit any response.

Peak XV Partners also told its LPs that it plans to markdown Byju's valuation significantly due to lack of visibility on audited financials, according to the Economic Times.

Peak XV Partners has joined Prosus, Byju's biggest institutional shareholder, in claiming that its board representative resigned because of disagreements with the edtech firm's executive leadership that contradicts Byju's position.

Earlier today, Prosus sent out an official statement saying that the decision of its Director to step down from Byju's board was taken after it became clear that he was unable to fulfill his fiduciary duty to serve the long-term interests of the company and its stakeholders.

The Netherlands-based investor added that executive leadership at Byju's regularly disregarded advice and recommendations relating to strategic, operational, legal, and corporate governance matters.

Moneycontrol had exclusively reported last month about these differences and what transpired between Byju Raveendran and the three board members, prompting the latter to step down. But Byju’s had maintained that the board resignations occurred because the investors' shareholding had fallen below the minimum required threshold.

On June 24, Russel Dreisenstock of Prosus, along with two other investor board members--Ravishankar of Peak XV Partners and Vivian Wu of Chan Zuckerberg Initiative, had stepped down from Byju's board.

On the same day, Deloitte, one of the biggest auditing firms globally, also tendered its resignation, adding to an already long list of troubles for the world's most-valued edtech startup.

The move by Peak XV and Prosus to officially clarify the reason behind their board representatives stepping down comes at a time when Byju’s has been scrambling with a host of issues. The company has also come under the scanner of government bodies such as the Enforcement Directorate (ED) and the EPFO (Employee Provident Fund Organisation) recently.

Byju’s is also yet to close a long-pending $700 million fund infusion, which would help the edtech tide over an immediate liquidity crunch. Earlier this week, Moneycontrol exclusively reported that Byju’s substantially downsized its office spaces in Bengaluru to cut costs. Byju’s has also laid off over 1,000 employees in the past two months as it looks to achieve profitability.