It's Byju's Vs Byju's This Time: Management Alleges Investors of Conspiracy

In a surprising turn of events, Byju's, the prominent edtech company, finds itself embroiled in a bitter feud between its management and a group of investors. A campaign was launched by a faction of investors who wants to oust the company's founder and group CEO, Byju Raveendran, triggering a swift response from the management in the form of a letter addressed to employees.

Management's Response: Accusations of Conspiracy

The management accused the investors of opportunistic conspiracy, alleging that they seized upon the company's crisis to demand Raveendran's resignation. Expressing disappointment, the letter to the employees emphasized the founders' significant investments in Byju's and their unwavering commitment to its success. The management alleged that instead of supporting the company during challenging times, these investors chose to air their grievances directly to the media.

“...We must address an unfortunate development. Certain investors, seeing the crisis we faced, saw it as an opportunity to conspire and demand the stepping down of our founder as the group CEO of BYJU'S. We are pained to see this action from a few of the investors who should have supported us in our fight at these challenging times, instead of directly speaking to media. The founders are the largest investors and the greatest fighters for BYJU’S," the letter said.

Oversubscribed Rights Issue

Byju's management sought to reassure employees and stakeholders by highlighting the success of the recently announced $200 million rights issue. Within just three days of its launch, the rights issue had garnered commitments exceeding 100 percent of the proposed amount. The management affirmed that this oversubscription demonstrates strong investor confidence and ensures sufficient growth capital to meet operational needs.

Investors Seek Extraordinary General Meeting (EGM)

The clash unfolded a day after the investors sought an extraordinary general meeting (EGM) to address concerns related to governance, financial mismanagement, and compliance issues. Among the resolutions proposed for the EGM was the reconstitution of the Board of Directors to diminish the founders' control and a change in the company's leadership.

Byju's Counters: Investors Lack Voting Rights on CEO Change

In a statement, Byju's clarified that the shareholders' agreement does not grant investors the right to vote on CEO or management changes. Despite the calls for a leadership change, the company asserted its commitment to proceed with the USD 200 million rights issue, citing encouraging responses from multiple investors. Byju's expressed gratitude for the broad support received from a significant portion of its shareholders.

"Think & Learn Private Limited, the parent of BYJU’S, has noted with sorrow, statements from a select few investors calling for an extraordinary general meeting (EGM) to replace founder and group CEO Byju Raveendran. Under these unfortunate circumstances, we would emphasise that the shareholder's agreement does not give them the right to vote on CEO or management change.

TLPL will continue with the proposed $200 million rights issue after receiving encouraging responses from multiple investors. The company is gladened by the support received by a wide section of its shareholders 

The criticality of the rights issue has been shared with all shareholders, with capital being pivotal for a successful turnaround. Unfortunately, the company and our employees are paying the price for a stand-off triggered by some investors. Business continuity is essential, and we shall prioritise this in our actions," Byju's said in a statement.

Past Challenges and Current Progress

The letter to employees followed a challenging period for Byju's, marked by the departure of three investors from the company's board in the previous year, triggering a broader crisis. Byju Raveendran and his leadership team, along with advisory board members Rajneesh Kumar and Mohandas Pai, formed a working group with the remaining investors to navigate the crisis constructively.

The working group has been regularly updated on crucial matters, including business restructuring, financial positions, and audits. Byju's highlighted its efforts to turn around the business, reducing monthly expenditures to near operational breakeven and planning an AI-led technological refresh. The company deemed the actions of unnamed investors disruptive, especially considering the challenging circumstances.

Commitment to Dialogue and Business Continuity

Byju's management pledged to maintain open dialogue, even in the face of adversity. They reiterated their commitment to meeting the company's obligations, including salary payouts. Emphasizing that Byju's had not received external investor funding for nearly two years, the company underscored the founder's infusion of over USD 1 billion as the primary reason for launching the rights issue—a rapid and equitable solution to raise funds.

"Byju Raveendran and his leadership team have kept TLPL afloat after three investors left the company’s board last year, triggering a broader crisis. The company, along with the advisory board consisting of Rajneesh Kumar and Mohandas Pai, constituted a working group with the investors to find a constructive way forward. 

The company and its leadership have updated the working group on all crucial matters, including ongoing business restructuring, financial position and audits. TLPL has been turning around the business, cutting the monthly burn to near operational breakeven and working on an AI-led technological refresh soon. In context, the actions of some unnamed investors are disruptive at a highly challenging time.

TLPL will remain on the path of dialogue even as the founders and the leadership find ways to meet the company’s mounting obligations, including salary payouts. We want to re-emphasise that the company has not had any external investor funding for nearly two years apart from the founder infusing over $1 billion — a reason why it launched a rights issue as a quick and equitable way to raise money," the statement added.

In the midst of this clash between management and investors, Byju's faces a critical juncture. The outcome of the proposed extraordinary general meeting and the continued success of the rights issue will play a crucial role in determining the company's future trajectory.

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