In the fast-paced world of business, battles for control and governance are not uncommon. Byju’s, one of India’s leading edtech companies, is currently embroiled in a power struggle between its major shareholders and its eponymous Founder and CEO, Byju Raveendran. The conflict has reached a boiling point, with investors calling for Raveendran’s removal from the company’s board. But the question remains; what are the implications of this showdown for Byju’s and the wider edtech industry?
The Investors’ Dissatisfaction
The discontent among Byju’s major shareholders has been brewing for some time now. Earlier this month, investors expressed their displeasure and issued a notice calling for Raveendran’s removal from the board of Think & Learn, the parent company of Byju’s. The investors, who collectively hold a 25% stake in the company, have cited concerns over governance, financial management, and compliance issues.
Notable shareholders such as General Atlantic, Prosus Ventures, Peak XV, and Chan Zuckerberg have joined forces and written a letter to the company, highlighting the need for a board change. Their dissatisfaction stems from a lack of confidence in Raveendran’s leadership and a desire for a more transparent and accountable management structure.
The Board Ouster Meeting
To address the investors’ demands, an Extraordinary General Meeting (EGM) has been scheduled for Friday, where the major shareholders will cast their votes on the proposed board ouster. The meeting is expected to be a turning point in the power struggle, as the resolution to remove Raveendran, along with his wife Divya Gokulnath and brother Riju Ravindran, from the board will be put to vote.
The resolution is expected to pass in favour of the investors, as they hold a 25% stake in the company. However, it is worth noting that Raveendran and his family are the largest shareholders, with a 26% stake. Despite this, the investors seem confident in their ability to rally enough support to secure the majority vote.
The Quorum Conundrum
Before the meeting can proceed, establishing a quorum is crucial. According to the company’s articles of association, a quorum requires the presence of two members. Additionally, the promoter-director, in this case, Raveendran, must attend the EGM; failure to do so can result in the postponement of the meeting for a week.
This requirement puts Raveendran in a delicate position. If he fails to attend the initial EGM, the meeting can be rescheduled, giving the shareholders in attendance the opportunity to constitute the quorum and proceed with the vote. It remains to be seen whether Raveendran will show up to the meeting or attempt to delay the proceedings.
Shareholder Dynamics
Apart from the major shareholders involved in the board ouster, other investors hold a significant stake in Byju’s. These investors collectively own 45% of the company, while the remaining shareholders have stakes in single digits. Their stance on the matter is yet to be known, but their votes could potentially sway the outcome of the meeting.
It is important to note that the investors who have issued the notice for the board ouster do not have voting rights, as they have signed a shareholder agreement that excludes such rights. This means that their influence is limited to advocating for change and persuading other shareholders to align with their viewpoint.
Byju’s Response
In response to the notice given by the major shareholders, Byju’s released a statement emphasizing that the shareholders’ agreement does not grant them the right to vote on CEO or management changes. The company expressed its disappointment in the investors’ actions and defended Raveendran’s position as the founder and group CEO.
Byju’s highlighted that Think & Learn, the parent company of Byju’s, has not given the major shareholders the right to call for an extraordinary general meeting for the purpose of replacing Raveendran. The statement also underscored the company’s commitment to its mission of providing quality education through innovative technology.
The Implications for Byju’s and Edtech
The outcome of the board ouster meeting will have far-reaching implications for Byju’s and the edtech industry as a whole. If the investors succeed in removing Raveendran from the board, it could signify a shift in the company’s direction and management style. This change could lead to a more investor-friendly governance structure and potentially impact Byju’s growth strategies.
The power struggle at Byju’s also sheds light on the challenges faced by the edtech industry, particularly in terms of governance and compliance. As the sector continues to expand rapidly, ensuring sound corporate governance practices and maintaining investor trust will be critical for edtech companies to sustain their growth and attract further investments.
Gazing into the Crystal Ball
As Byju’s investors gear up for the crucial board ouster meeting, the future of the company hangs in the balance. The clash between the major shareholders and the founder and CEO, Byju Raveendran, underscores the importance of governance, transparency, and accountability in the edtech industry. The outcome of this power struggle could have significant ramifications not only for Byju’s but also for the broader edtech landscape. It remains to be seen how this showdown will unfold and what it means for the future of Byju’s and the edtech sector as a whole.
