Byju’s US Unit Files For Bankruptcy As Investors Seek Board Overhaul And Ouster Of Byju Raveendran And Family; Will They Oblige?

Byju’s, once a leading education technology startup, has encountered yet another setback as its US subsidiary initiates Chapter 11 bankruptcy proceedings in the US Court of Delaware, disclosing debts ranging from $1 billion to $10 billion.

 

The filing from Byju’s Alpha unit indicates assets valued between $500 million to $1 billion. It further reveals an estimated creditor count ranging from 100 to 199.

Founded by Byju Raveendran, the ed-tech giant once boasted a valuation of $22 billion in 2022. However, recent developments have seen creditors resorting to legal measures. Several investors now suggest a diminished valuation, ranging from $1 billion to $3 billion.

In an attempt to address immediate financial obligations, Byju’s announced plans to raise $200 million through a rights issue of shares. These funds are intended to cover operational expenses and outstanding debts.

Moreover, the company has been engaged in negotiations concerning the repayment of a substantial $1.2 billion term loan, alongside significant layoffs affecting numerous employees.

Amidst financial turbulence, Byju’s has come under scrutiny from Indian regulatory bodies regarding potential breaches of the country’s foreign exchange regulations.

The Collective Verdict
A collective of investors in Byju’s are pushing for a change in the company’s leadership, citing concerns about future stability under the current management led by Byju Raveendran.

These investors are advocating for an Extraordinary General Meeting (EGM) to address issues related to governance, financial management, and compliance.

They also aim to overhaul the Board of Directors, advocating for a composition that is not solely controlled by the founders of Byju’s parent company, Think & Learn. Additionally, they are advocating for a change in the company’s leadership.

Presently, the company’s board is predominantly comprised of founder and CEO Byju Raveendran, along with his co-founder and wife Divya Gokulnath, and his brother Riju Ravindran, following the departure of other members in the previous year.

This marks the first instance of shareholders collectively expressing their desire for a change in leadership within the company. However, it is noteworthy that this is the third time that investors have issued an EGM notice.

In a statement released on Thursday, the investor group highlighted their prolonged efforts to engage with the company regarding persistent concerns regarding corporate governance, mismanagement, and compliance.

These efforts have been ongoing since directors nominated by Prosus and other shareholders resigned from the board in June 2023.
While acknowledging the efforts of the independent advisory council in addressing certain challenges facing Think & Learn, the investor group remains apprehensive about the company’s future stability under the current leadership and board composition.

Concerns over Byju Raveendran’s direct involvement in the company’s day-to-day operations have also been raised by investors, as reported.

Former SBI chairman Rajnish Kumar and ex-Infosys CFO Mohandas Pai are part of Byju’s board advisory council, having joined in July following the resignation of investors such as Prosus, Peak XV Partners (formerly Sequoia Capital India), and Chan Zuckerberg Initiative.

On January 29, Byju’s initiated a $200 million fundraising through a rights issue, with a valuation estimated between $230-$250 million. The valuation represents a significant decrease compared to the company’s previous funding round, which occurred at a valuation of $22 billion.

The Viewpoint
The collective action taken by investors in Byju’s spotlights deep-seated concerns regarding governance, financial management, and compliance within the company.

With calls for a change in leadership and an overhaul of the Board of Directors, Byju’s faces a critical moment in its trajectory. The outcome of these efforts will likely shape the future direction and stability of the company, particularly amidst significant changes in valuation and ongoing regulatory scrutiny.

Future Trajectory?
The future trajectory of Byju’s hinges on its ability to address the concerns raised by investors and stakeholders effectively.

A successful resolution to governance issues and a transparent restructuring of leadership could potentially restore investor confidence and pave the way for sustainable growth.

Additionally, Byju’s must adhere to the evolving regulatory landscape and uphold compliance standards to mitigate risks.

Strategic initiatives to diversify revenue streams, enhance product offerings, and expand into new markets may also be crucial in ensuring long-term success.

At the same time, Byju’s must helm these challenges carefully to restore investor confidence to secure its position as a leader in the edtech sector; what remains to be seen is if and whether Raveendran Byju’s and his associate family members will indeed step down as mandated by the investors.