Four shareholders took legal steps by submitting a mismanagement and oppression suit against Raveendran to the National Company Law Tribunal, aiming to oust him from the company on Friday. This action follows a Karnataka High Court ruling in favor of the CEO. This development aligns with an emergency meeting convened among Byju’s investors, where they are on the verge of voting on the potential removal of CEO Raveendran and his family from the company’s board of directors. The Raveendran family disputes the legitimacy of this extraordinary general meeting (EGM) initiated by shareholders. The suit presented by the shareholders not only calls for the dismissal of Raveendran but also advocates for a forensic audit of the company, the appointment of a new board, and the annulment of the rights issue.
About Company: BYJU’S was established in 2011 under the name Think and Learn Pvt. Ltd, with founder Byju Raveendran leading the way as an educator and engineer. Headquartered in Bangalore, India, and maintaining offices in Palo Alto, CA, the company rapidly rose to prominence as a global leader in the ed-tech sector, securing a position among the top 5 most-valued private internet companies in India.
The company’s flagship product, BYJU’S – The Learning App, made its debut in India in 2015, gaining immense popularity and currently reaching over 100 million registered students globally, boasting 6.5 million annual paying subscribers. Students dedicate an average of 71 minutes per day to engage with educational content on the platform. In 2019, BYJU’S expanded its offerings with the launch of the Disney. BYJU’S Early Learn App in India, designed to provide personalized and interactive programs tailored for young learners.
Raveendran’s innovative methods quickly garnered attention from both students and investors, resonating with learners’ individual needs. Major investors, including the Chan Zuckerberg Initiative and Sequoia Capital, joined in, propelling Byju’s into a billion-dollar startup and reflecting the high expectations for the future of online education in India.
Successes and Setbacks
Despite the initial success, Byju’s faced challenges during its rapid expansion. Corporate governance issues surfaced, impacting the company’s reputation. Allegations of unethical accounting practices and mishandling of user data tarnished its image. Deloitte, the company’s auditor, resigned due to delayed financial statement submissions, and independent directors departed from the board. These challenges resulted in defaults on loans and counter-lawsuits against creditors, underscoring the need for robust corporate governance.
Upsurge during the Pandemic
The advent of the COVID-19 pandemic presented both opportunities and challenges for Byju’s. The shift to remote learning led to a surge in demand for online education platforms. Byju’s responded by introducing ‘Live Classes,’ replicating the traditional classroom environment and attracting millions of students. Aggressive acquisitions, including the $300 million WhiteHat Jr deal and successful fundraising campaigns during the pandemic, further strengthened the company’s position.
Unforeseen Challenges
However, as the pandemic subsided, Byju’s encountered unexpected challenges. The anticipated sustained demand for ed-tech solutions in India did not materialize as expected. Cultural preferences for traditional classroom-based learning, the persistent digital divide, and limited internet access hindered the adoption of online learning. Byju’s reported a loss of $327 million in 2021, prompting concerns about its financial stability. Despite gaining popularity, Byju’s faced severe criticism for its marketing strategies, exploiting parental fears about their children’s academic future. Disturbing allegations, including the targeting of first-generation learners and aggressive sales strategies, fueled public outrage.
The Downfall
Accumulating allegations, diminished demand for online learning, and technical glitches led Byju’s into a crisis. The company’s financial situation deteriorated, and investor confidence dwindled. Once valued at $22 billion, Byju’s stock plummeted to $5.1 billion, with key investors like Prosus NV significantly reducing their stake. In a bid to salvage the company, Raveendran took strategic steps, such as appointing a new auditor and seeking new shareholders. However, these measures alone couldn’t address the fundamental issues plaguing corporate governance and the business models.