Byju’s $200 million rights issue has been fully subscribed, its founder informed shareholders, in a desperate relief to the financially beleaguered edtech startup just ahead of an extraordinary general meeting called by a group of investors to seek removal of Byju Raveendran as the chief executive and change in the board.
Raveendran said he is taking more steps to ensure transparency on how the funds will be utilised and alleged that a “few vested interests” are acting against the company.
“In order to increase shareholder representation, I commit to restructuring the Board and appointing two non-executive directors to the Board by the mutual consent of the founder and shareholders; right after the FY23 Audit, which we expect to close by the end of this quarter. I believe this will be in the best interest of the company and allow for greater engagement with shareholders,” Raveendran said in a note to shareholders around midnight Wednesday.
“To ensure transparency with regard to the usage of funds raised through the rights issue, we will appoint a third-party agency to monitor the same. This agency will report to all shareholders on a quarterly basis, within 45 days from the end of the quarter, along with commentary from the Board,” he said. Raveendran did not name the investors who have subscribed to the rights issue.
ET has reviewed Raveendran’s communication to Byju’s shareholders.
The development comes amid simmering tensions between Raveendran and a group of investors who have publicly demanded his removal. The investors have cited a complete lack of transparency into the company’s operations as the key reason for his ousting.
Raveendran reiterated, in his note, that a few vested interests are acting against the company at a time when it is facing a severe cash crunch. “I refuse to let the self-serving actions of a few individuals cloud my judgment and pollute our relationship,” he said.
“This investment is an investment in our shared destiny and is the first step towards success. The amount, by design, will not strain shareholders but will be of immense value to the company. It is a small step for you, but it will be a collective relief for all stakeholders, ensuring goodwill and hard work on the road ahead,” Raveendran said.
As the rights issue is happening at a 99% discount to Byju’s peak valuation of $22 billion, any investor not participating in the fundraise would see their shareholding wiped off. Certain investors have been miffed about this, alluding that Raveendran wants to increase his shareholding in the company by doing the rights issue at a throwaway price.
Earlier this month, Byju’s hit back against the investor group, which called for his removal as CEO and change in the board, saying that it has ‘no voting rights’ for the same. The edtech firm termed the investors’ move as “unfortunate” and that the “company and its employees are paying the price for a stand-off triggered by some investors.”
“We are deeply concerned about the future stability of the company under its current leadership and with the constitution of the board,” an investor group comprising Peak XV Partners and Prosus said earlier.
The board members of Think & Learn, which runs Byju’s, comprise Raveendran, his wife and Byju’s cofounder Divya Gokulnath, and brother Riju Ravindran. Former State Bank India chairman Rajnish Kumar and former Infosys finance chief Mohandas Pai are part of Byju’s advisory council, which was formed in July after the resignation of Prosus, Peak XV and Chan Zuckerberg Initiative representatives from the board.
Raveendran said his benchmark of success is the participation of “all shareholders in the rights issue.”
“We have built this Company together and I want us all to participate in this renewed mission. Your initial investment laid the foundation for our journey and this rights issue will help preserve and build greater value for all shareholders,” he said in the note to shareholders.
He claimed that despite the headwinds faced by Byju’s, there are ‘tangible indicators’ of the firm’s future potential. “The traffic on our website and apps has shown remarkable growth in spite of reduced marketing spends in the recent past. This is a clear testament to the value our users find in our services and the faith they put in our content. The negativity has affected perception of the brand, but consumer belief continues to grow,” he added.
