Byju’s is in preliminary talks with prospective shareholders for a $1 billion (roughly Rs. 8,200 crores) funding round to stave off moves by some investors to curtail founder Byju Raveendran’s control over the beleaguered tech startups.
Byju’s, once considered one of India’s most successful startup, has lost three board members representing major investors Peak XV, Prosus NV, and the Chan-Zuckerberg Initiative, as well as auditor Deloitte, and is now in what many see as a governance crisis.
Deloitte said that it had severed ties with Byju’s over delays in disclosing some financial statements, although the board members did not give a reason for their resignation. Additionally, the company was searched for possible violations of exchange rate laws.
According to Bloomberg News, Byju’s is offering potential investors benefits like preferred treatment in the case of a liquidation, adding that none of its existing shareholders have that choice.
The individuals, who are not to be named as the information is private, told sources that it was unclear whether the company’s founder Byju Raveendran will ultimately get a capital influx.
Purpose of a fundraising plan
The report also stated that the company is likely to use a portion of the funds generated to settle a $1.2 billion term loan that is under dispute. Regarding loan restructuring, Byju’s and its lenders are involved in cases in the United States.
According to three sources with direct knowledge of the matter who spoke to Reuters last Friday, the startup, which was valued at $22 billion last year, has asked investors to reconsider quitting its board.
According to report, Byju’s founder and CEO Byju Raveendran plans to reconstitute the company’s board after the fundraising is complete because new investors may fill any of the vacancies.
Discontent Investors
The company has resisted calls from a few investors to take away Mr. Raveendran’s privileges given by a shareholders’ agreement, including the right of first refusal when investors seek to dispose of their stake, according to the people. According to the persons, the investors were discussing options such as combining some of Byju’s company with rivals in equity deals.
Some of the startup’s existing shareholders, who together with Mr. Raveendran control a large voting bloc, are supporting the founder in the meantime. After Mr. Raveendran and Chief Financial Officer Ajay Goel conducted a call over the weekend to assure investors that the fundraising is on track and that long-delayed financial accounts will be finalized soon, the opposing shareholders were momentarily appeased, the people said.
However, they told that prolonged delays in completing the promised equity raising might threaten the founder’s influence over the business.
Byju’s and its lenders are fighting over the $1.2 billion (roughly Rs. 99,274 crores) term loan after the firm breached the terms of its debt agreement. Early this month, it elected to skip an interest payment on the loan and filed a lawsuit in New York alleging a group of investors manufactured a fake debt crisis to extort money from the firm.
