A host of blue chip investors like Prosus, General Atlantic and Peak XV on February 23 voted to fire Chief Executive Officer (CEO) Byju Raveendran from edtech company Byju’s, which once towered over Indian unicorns with a $22-billion valuation.
Investor sources told Moneycontrol that shareholders of about 60 percent stake in Byju's voted in favour of the resolutions, but company sources argued that those in favour of the resolutions only hold about 47 percent of the shares.
In an extraordinary general meeting (EGM), which Raveendran, his wife and brother — the only board members — decided to skip, investors passed resolutions to overhaul the embattled education platform's leadership, reconstitute the board and start a forensic probe into alleged governance breaches.
"At today’s Extraordinary General Meeting, shareholders unanimously passed all resolutions put forward for vote. These included a request for the resolution of the outstanding governance, financial mismanagement and compliance issues at BYJU’s; 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," said a spokesperson from Prosus, the investors that led the EGM.
They added that as shareholders and significant investors, they are confident about the validity of the EGM meeting and its decisive outcome.
The EGM went on for about four hours and concluded after voting on proposed resolutions even as it initially faced several disruptions, as unknown people tried to allegedly sabotage the meeting.
However, a Karnataka High Court order bars enforcing any of the decisions taken in the EGM till the next date of hearing on March 13. The HC order came earlier this week on a petition filed by the company against its investors.
In the statement, the investors also said that they plan on presenting their case to the Karnataka High Court.
In the next steps, investors also plan to determine CEO and CFO (chief financial officer) status for each entity under Byju’s and the same on the group level, establish an interim succession plan, including hiring a third-party temporary CEO for the consolidated entity.
Investors also voted to restructure the board of directors to increase shareholder representation, incorporate independent input, and improve corporate governance, they said. They will now work on creating a nine-member board within 30 days, nominate three independent directors by shareholders, appoint three shareholder directors, and two company executive management employees on the new board.
They will also appoint a chief compliance officer and a senior regulatory affairs official reporting to the new board.
Late February 22, Raveendran wrote a letter to shareholders saying his and the promoters' absence would invalidate the EGM proceedings.
Sources said for resolutions to be passed, they had to be backed by the majority of those who attended the meeting.
Four investors — Prosus, General Atlantic, Sofina, and Peak XV — along with support from shareholders including Tiger and Owl Ventures, also filed an "oppression and mismanagement" suit against the promoters.
They also urged the Bengaluru bench of the National Company Law Tribunal to declare the promoters unfit to run the company, appoint a new board, declare the rights issue as void and order a forensic audit.
These developments come even as the company said its rights issue floated to raise $200 million, at a valuation cut of 99 percent, was fully subscribed. The “dissenting investors” stand to have their stakes diluted massively if they do not participate in the issue till February 29.
Raveendran, his wife and co-founder Divya Gokulnath, and brother Riju Ravindran together hold a 26 percent stake in the company. Investors seeking their ouster held over 30 percent in the company as of June 2022.
Byju's, which was once India's most-valued startup, has been under fire since the start of 2022 over a range of issues, including accounting irregularities, alleged misselling of courses, and mass layoffs.
The company has let go of thousands of employees over the past 12 months, as it battled a double blow of drying venture capital funding and slowing demand for online learning services. Its investor board members have left, too, citing differences with Raveendran.
The company has tried to fix some of the problems. Its early investor Ranjan Pai ploughed in the capital, it set up an advisory council with veterans such as Mohandas Pai and Rajnish Kumar and elevated Arjun Mohan as CEO. It is also in talks to divest assets such as Great Learning and Epic.
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