Ahead of EGM to oust CEO Raveendran: Byju’s $200 million rights issue fully subscribed, offers to restructure board

This $200 million funding is expected to give the company the capital it needs to ensure that it can “take care of the current liabilities and also provide sufficient growth capital to get us back to our former glory”, Raveendran said.

“The ownership of the company does not change pre and post a rights issue, so the question of valuation itself is irrelevant as value preservation is maintained,” Raveendran said in the letter to the shareholders. Raveendran reportedly put around $ 45 million in the rights issue.

“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,” Raveendran said. “I believe this will be in the best interest of the company and allow for greater engagement with shareholders.”

The company and its founders were battling for survival with a group of shareholders seeking an EGM for the removal of Raveendran and family members from the board of the company. However, Byju’s has said these shareholders don’t have voting rights. “We would emphasise that the shareholder’s agreement does not give them the right to vote on CEO or management change,” the company said in an earlier statement.

“As the largest shareholder and provider of capital to the company, it would have been in my best interest to price this rights issue high. But that would not be in the best interest of the company,” Raveendran said, on the low valuation.

“I choose to go ahead and invest because of my belief in the resilience of our team and the strength of our business model to bounce back higher with even more rigour,” he said in the letter.

Raveendran said he personally put in $1.1 billion in the company over the last two years to pay salaries and maintain operations. “I view this not as an obligation, but as my Dharma and duty,” he said.

Byju’s is pinning its hopes on the rights issue funding and board restructuring. “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,” Raveendran said in the letter.

Deloitte Haskins & Sells, auditors of the company, had recently resigned, citing its inability to finalise audit reports for the financial years ended March 2021 and March 2022 amid escalating concerns on the financial front. The company, which made a loss of over Rs 4,500 crore in FY2021, was trying to cut costs by laying off employees across various departments and has laid off around 5,000 employees. Its losses for FY22 and FY23 are not available.

The financial result for FY2021 was filed after a delay of 18 months. The numbers were dismal, indicating a cash crunch at the company. Geopolitical tensions and rate increases also impacted its performance.