Ahead of Friday’s extraordinary general meeting (EGM), Byju Raveendran, chief executive officer (CEO) of Byju’s, told shareholders that he is committed to restructuring the board of the embattled educational technology (edtech) firm.
He also committed to appointing two non-executive directors to the board by the mutual consent of the founder and shareholders.
The development comes at a time when a consortium of key shareholders, holding over 30 per cent stake in Byju’s, issued a notice to the embattled edtech firm this month, calling for an EGM to address “persistent issues”, including a proposed change of management at the firm.
These shareholders will vote to alter the company’s existing board, which includes asking Byju to step down as CEO and relinquish his operational role at the firm, sources said.
“My duty to my shareholders is still steadfast,” said Byju in a letter addressed to shareholders, a copy of which Business Standard has seen.
“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.”
This would be done right after the 2022-23 audit, which the firm expects to close by the end of this quarter.
The initiative will allow for greater engagement with shareholders.
The current board of Byju’s parent, Think and Learn, includes Byju, his wife, and Byju’s co-founder Divya Gokulnath, and his brother Riju Raveendran.
Cash-strapped Byju’s recently made a move to raise $200 million by way of a rights issue to all its equity shareholders.
This will give the company the capital it needs to ensure it can take care of its current liabilities and support growth.
If Byju’s raises $200 million, its post-money valuation will be between $230 million and $250 million, a 99 per cent drop from the $22 billion valuation the firm had in 2022, according to sources.
Byju told shareholders that the rights issue is fully subscribed.
“But my benchmark of success is the participation of all shareholders in the rights issue,” said Byju.
“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.”
To ensure transparency concerning the usage of funds raised through the rights issue, Byju said that the firm will appoint a third-party agency to monitor the same.
This agency will report to all shareholders quarterly, within 45 days from the end of the quarter, along with commentary from the board.
“I understand that participating in this rights issue may seem like a Hobson’s choice.
"However, this is the only viable option in front of us today to prevent permanent value erosion,” said Byju.
“I’m reminded of the words of Abraham Lincoln: ‘A house divided against itself cannot stand’.
"We must stand together and act in the company's best interest.”
Byju said that a lot of media speculation has come about the pricing of the rights issue.
Based on discussions, the board decided on a price that would be attractive to all shareholders without straining them.
The aim is for all shareholders to participate in this.
Byju’s chose a rights issue as the most equitable way of raising capital without ascribing a valuation.
This is a well-established element of corporate capital raises.
The ownership of the company does not change pre- and post-rights issue.
Byju said the question of valuation itself is irrelevant as value preservation is maintained.
Byju said that he has always placed his interests aside when he deals with the company.
He decided to invest because he believed in the resilience of the team and the strength of the business model to bounce back higher.
“Value is built, and I have always been a builder in addition to being a teacher,” he said.
This belief is not based on hope alone.
“I say this with the confidence of the bootstrapped founder from 10 years ago who took his startup from 0 to $22 billion with his blood, sweat, and tears,” said Byju.
The same intensity is being brought to the table with renewed vigour.
The highest duty of an entrepreneur is to support the team and shareholders.
“I have personally put in $1.1 billion in the company over the last two years to pay salaries and maintain operations,” said Byju.
“I view this not as an obligation but as my dharma and duty.
"I have sacrificed everything to not fail in this duty.”
Byju said that a few vested interests are misrepresenting Byju’s relationship with shareholders as adversarial.
Such narratives could not be further from the truth.
There is nothing to be gained from conflict, especially with those who share the company’s commitment and conviction towards a common cause.
“I refuse to let the self-serving actions of a few individuals cloud my judgement and pollute our relationship.”
Despite these headwinds, there are tangible indicators of the company’s brand strength and future potential.
The traffic on the website and applications has shown remarkable growth despite reduced marketing spending in the recent past.
The negativity has affected the perception of the brand, but consumer belief continues to grow.
The firm is launching Byju’s Wiz, an artificial intelligence (AI)-powered tool designed to be a study companion for students.
Byju’s AI model, trained with data generated over eight years and integrated with GeoGebra’s arithmetic engine, delivers 99 per cent accuracy in answers, surpassing any other model currently available globally.
