Byju's Salary Standoff: CEO Blames Investors in Funding Fiasco

“20000+ BYJU’S employees left in the dark on salaries, because of 4 investors going to NCLT. Escrow account request by 4 investors has created delay in salaries of BYJU’S employees,” This is what a Byju’s insider told TICE News.

Byju Raveendran, founder and CEO of edtech giant Byju's, lashed out at a group of investors, accusing them of obstructing the company's ability to disburse salaries to its employees. The dispute stems from a contentious rights issue, with four key investors, including Prosus, Peak XV Partners, General Atlantic, and Sofina, seeking legal intervention to prevent Byju's from accessing the funds raised.

In a letter addressed to employees on Saturday, Raveendran expressed his regret, stating, "...I regret to inform you that we will still be unable to process your salaries… Unfortunately, a select few (4 out of our 150+ investors) have stooped to a heartless level, ensuring that we are unable to utilize the funds raised to pay your hard-earned salaries."

Locked Funds and Legal Battle

Raveendran highlighted that the investors' influence led to the funds from the rights issue being locked in a separate account. Despite successfully closing the $200 million rights issue, Byju's is now grappling with a crisis, attempting to find alternative solutions to ensure salary disbursement by March 10.

Allegations, Counter Allegations and Legal Proceedings

The four investors approached the National Company Law Tribunal (NCLT), citing serious allegations of fund misappropriation by the company's promoters. They claimed ongoing investigations by the Enforcement Directorate (ED) and Ministry of Corporate Affairs (MCA). While the court permitted Byju's to proceed with the rights issue, it issued an interim order directing the startup to keep the funds in a separate escrow account until the resolution of the investors' lawsuit alleging oppression and mismanagement.

Raveendran accused the investors of displaying a callous disregard for the employees' well-being despite reaping substantial profits. He stated, "It is an agonizing reality that some of these investors have already reaped substantial profits – in fact, one of them has made a staggering eight times their initial investment in Byju’s. And yet, their actions convey a callous disregard for our lives and livelihoods."

Financial Strain and Extraordinary General Meeting (EGM)

The edtech giant, facing a financial crunch, had relied on the rights issue to raise capital and meet its immediate obligations. However, with the funds locked, Byju's now needs to convene an Extraordinary General Meeting (EGM) to seek shareholder approval and increase authorized capital. Raveendran acknowledged the exhaustive efforts made to explore every possible avenue, engage legal teams, and advocate for employees' rights.

Board Restructuring and CEO's Position

The company is embroiled in a bitter conflict with its investors, a majority of whom voted to oust Raveendran as the CEO and restructure the family-run board. The ongoing feud raises questions about the future leadership and governance structure of Byju's, a once-thriving edtech unicorn now entangled in financial and managerial controversies.

The strife between the CEO and investors underscores the challenges faced by even the most prominent players in the rapidly evolving edtech landscape.

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