Shareholders at Byju's are set to vote on Friday on a resolution brought by some investors to oust founder CEO Byju Raveendran and his family members over alleged "mismanagement and failures" at what was once India's hottest tech startup.
However, the outcome of the vote at the extraordinary general meeting (EGM) will not be applicable until March 13, when the Karnataka High Court will next hear Raveendran's plea challenging the move by certain investors.
Karnataka High Court Decision: EGM Proceeds Despite Founder's Challenge
The Karnataka High Court on Wednesday refused to stay the EGM, called by shareholders collectively holding more than 32 per cent stake in Byju's. Raveendran and family own 26.3 per cent in the company.
The EGM notice calls for ouster of the current board of Think & Learn, the firm that operates Byju's, composed of Raveendran, his wife and co-founder Divya Gokulnath and his brother Riju Ravindran.
While reopening after the pandemic that saw students who earlier opted for online learning going back to physical classes and the recent acquisition of Aakash putting Byju's under financial strain, the edtech firm in last one year suffered others setbacks including its auditor resigning, lenders beginning bankruptcy proceedings against a holding company and a US lawsuit disputing the terms and repayment of a loan.
Valuation Tumble: Byju's Sees a Sharp Drop from USD 22 Billion to USD 200 Million
Byju's was valued at USD 22 billion in 2022 and it is now valued at USD 200 million in a rights issue.
To mollify investors, Raveendran this week wrote to them saying he is taking more steps to ensure transparency on how the funds will be utilised and committed to restructuring the board including appointing two non-executive directors to the board by mutual consent of the founder and shareholders.
Detailing the reasons for seeking the ouster, the notice listed alleged financial mismanagement, erosion of value due to management's failure to enforce the company's legal rights and concealment of material information.
The EGM notice detailing alleged financial mismanagement states that the company management failed to explain about the show cause notice by the Enforcement Directorate (ED) on alleged contraventions, failure to resolve term-loan with lenders, conflict with BCCI over cricket sponsorship and Raveendran allegedly misleading shareholders about a term-loan.
Other charges include failure to complete the audits, and delay in payment of statutory obligations, including taxes deducted at source, provident fund deductions and contributions. There is also the allegation of delay in payment of obligations to employees, including final settlement to staff who have left the company.
The EGM notice has been backed by General Atlantic, Peak XV, Sofina, Chan Zuckerberg, Owl, and Sands, who collectively account for about 30 per cent stake in Byju's.
