The escalating conflict between Byju’s leadership and its investors, who are intensifying efforts to remove Byju Raveendran as chief executive officer (CEO) and drop his family members from the board, may evolve into a protracted and intricate legal battle, according to industry sources and legal experts. They said the ongoing episode may negatively impact the edtech giant’s operations and market reputation.
People close to Raveendran and industry sources said that he has no intention of stepping down as CEO and is prepared to fight the investors “tooth and nail” to ensure that he and his family members retain control of the firm. Raveendran has told employees that he has personally put in $1.1 billion in the company over the past two years to cover salaries and maintain operations. “Raveendran has been raising money from loan providers by giving personal guarantees to help the firm survive,” said a person close to the Byju’s CEO.
Sonam Chandwani, managing partner at law firm KS Legal & Associates, said: “Byju Raveendran, known for his deep commitment and immense personal sacrifices for the company, is unlikely to step down without a fight. This resistance could lead to protracted legal disputes, making the situation messier and potentially impacting the company’s operations and market reputation.”
During an extraordinary general meeting (EGM) on Friday, Byju’s investors voted and passed resolutions, including the removal of Raveendran as CEO, according to Prosus, the Dutch investment firm which owns about 9 per cent of the edtech company. They also passed resolutions to change the board, which includes Raveendran’s wife and co-founder, Divya Gokulnath, and his brother Riju Ravindran. According to investor sources, holders of over 60 per cent of the cap table voted in favour. They said that Byju’s founders hold 23-25 per cent of the cap table.
The investors conducted the EGM on Friday as they were “deeply concerned” about outstanding governance, financial mismanagement, and compliance issues and wanted a change in leadership of the company. Raveendran and his family didn’t attend the meeting.
Decisions taken at the EGM are subject to a hearing scheduled on March 13 by the Karnataka High Court. Think and Learn, the parent company of Byju’s, had filed a plea in the court on February 21 opposing the EGM.
After the EGM, Raveendran reached out to the company’s 15,000 employees and told them that the management remains unchanged, and the board stays the same. “Rest assured that I am not taking any of these allegations lying down and will challenge these illegal and prejudicial actions,” he said in the letter addressed to the employees, a copy of which has been seen by Business Standard.
He said the claims made by a small group of select minority shareholders that they have unanimously passed the resolution in the EGM are completely wrong. Raveendran said that only 35 out of 170 shareholders (representing around 45 per cent of shareholding) voted in favour of the resolution. That in itself shows the very limited support that this “irrelevant” meeting received.
In this high-stress scenario, the survival of Byju’s itself becomes a central concern. “Regardless of who emerges victorious in this power struggle, the prolonged uncertainty and internal conflicts could harm the company's stability and growth prospects,” said Chandwani of KS Legal & Associates. “For a firm that once symbolised the meteoric rise of edtech, this infighting and legal wrangling could signal a cautionary turn in its journey.”
Ashlesha Gowariker, senior partner at law firm Desai & Diwanji, believes that the investors calling the EGM and its outcome could have a significant impact on the founders. “This is the start of the proceedings that could ultimately result in the founders no longer holding office in the company they started,” said Gowariker. “This would be a rare situation in India, where the promoters might be ousted from office due to activist shareholder action.”
Gowariker said the EGM outcome adds uncertainty to the functioning, operations, and oversight of the business and affairs of the firm.
However, Raveendran, in the letter, asserted that the governance of the company is anchored in the Articles of Association and the Shareholder Agreement, further reinforced by the prevailing company law. These documents collectively form the constitutional backbone of the company’s operations, setting out the rules and procedures by which everyone must abide.
Raveendran alleged that during the EGM on Friday, a lot of these essential rules were violated. Quoting American writer Mark Twain, he said: “A lie can travel halfway around the world while the truth is still putting on its shoes.”
Meanwhile, a group of four investors have filed an oppression and mismanagement suit against the company’s management in the National Company Law Tribunal (NCLT), Bengaluru Bench, to declare the founders unfit to run the company. The group has also asked for the appointment of a new board, declaring the rights issue as void.
The company has raised $5.08 billion from investors. The cash-strapped firm is now looking to raise $200 million via the rights issue. If that goes through, 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 the sources.