Three board members of Byju's have tendered their resignations owing to differences with founder Byju Raveendran on key operational issues in the latest setback for India's most valued startup. G V Ravishankar of Sequoia Capital (now Peak XV Partners), Vivian Wu of Chan Zuckerberg Initiative, and Russell Dreisenstock of Prosus have resigned, said people familiar with the matter. The resignations of these non-executive directors are yet to be accepted, they said.
Riju Raveendran, Byju Raveendran, and Divya Gokulnath are the other three board members.
Peak XV Partners (formerly Sequoia Capital India) and Prosus did not respond immediately to queries sent by Moneycontrol. Byju's denied the development and termed it "entirely speculative".
"Since last year, there have been ongoing differences between the founders and the board over the way in which the company was run," said one of the sources close to shareholders quoted above.
Big setback
"There was divergence in the way Byju Raveendran approached lender management. The founders did not listen to board members and investors, and there was no transparency in the way the company was operated. The trust-building was lacking," the person added.
There was a meeting of Byju's investors on Sunday where these board members informed shareholders about their resignations, the person added.
The development is a big setback for the world’s most-valued edtech firm, which is currently in a tiff with its lenders in the US while also dealing with mounting financial woes in India. It also indicates signs of distress on an operational and financial level at the company.
The board members' departure also comes at a time when Byju's is looking to take Aakash Educational Services, its most-successful acquisition to date, public by mid-2024. The board of Byju's had formally approved the Aakash IPO in early June.
Earlier this month, Byju’s said that it had filed a case against one of its lenders in the New York Supreme Court challenging the acceleration of the term loan B it raised in November 2021. Byju’s also skipped paying $40 million in interest that was due on June 5, technically defaulting on the loan.
To be sure, Byju’s has been engaging in discussions with its lenders since December last year when the company sought easier terms on the loan as it was looking to save costs with an aim to achieve profitability.
But the company’s lenders asked for quicker part payment of the $1.2 billion loan after Byju’s failed to meet certain conditions, including a September 2022 deadline for filing its results for the year ended March 31, 2022, Bloomberg News reported. Earlier this month, the lenders scrapped these negotiation talks after filing a case against the company in the Delaware court.
Byju's soared to new highs in March last year, when it raised a massive $800 million round at a $22 billion valuation. But since then, the company has come under fire for a number of reasons including accounting irregularities, tussle with lenders, mass layoffs and mounting losses. Byju's has raised $250 million at the same $22 billion valuation since then, and is in talks to raise $700 million more at the same valuation.
Byju's offices in Bengaluru were also searched by India's financial probe agency Enforcement Directorate in April under provisions of the Foreign Exchange Management Act. The company is yet to file audited results for FY22 (2021-22).
For FY21 (2020-21), Byju's reported a huge jump in losses to more than Rs 4,500 crore, while its revenue dropped marginally, a surprise since FY21 was the first year of Covid that gave online learning companies a shot in the arm.
Founded over a decade ago by former teacher Byju Raveendran, Byju’s has raised over $5 billion, most of it in the past five years.
Meanwhile, Deloitte, one of the biggest audit firms in the world, has tendered its resignation as the statutory auditor of Byju's, adding to a long list of troubles for India's most valued startup.
Also read: Deloitte resigns as statutory auditor of Byju's and Aakash Educational
Deloitte's resignation leaves Byju's in limbo as the edtech company's FY21 (2020-21) results had outlined a number of irregularities with respect to the company's revenue recognition practices.
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