Bangalore, India – February 23, 2024: In a major development, a group of prominent investors in Byju’s, India’s leading edtech company, have filed an oppression and mismanagement suit against the company’s co-founder and CEO, Byju Raveendran, and other top management members. The investors, including Prosus Ventures, General Atlantic, Sofina, and Peak XV, have accused the management of “mismanagement and failures” that have led to significant financial losses and erosion of shareholder value.

The suit also questions the “oppressive nature” of the rights offer and unauthorized corporate actions related to the acquisition of Singaporean edtech company Northwest Education Pte.

The suit, filed before the National Company Law Tribunal (NCLT) in Bangalore, seeks a range of reliefs, including:

Removal of Raveendran and his family members from the Byju’s board:

The investors allege that Raveendran and his family have undue control over the company, leading to conflicts of interest and hindering independent decision-making. The investors are seeking to declare the founders, including CEO Byju Raveendran, as unfit to run the company. They are also calling for the appointment of a new board. The suit further requests that the just-concluded rights issue be declared void.  Additionally, they have requested a forensic audit of the company¹².

Appointment of a new board:

The suit seeks the appointment of a new board with independent directors to ensure better corporate governance and oversight.

Declaration of the recent rights issue as void:

The investors claim that the rights issue, which raised $200 million, was conducted in an unfair and prejudicial manner, diluting their shareholding.

Forensic audit:

The suit demands a thorough forensic audit to investigate alleged financial irregularities and mismanagement.

The investors point to several concerns, including:

Loss of control over Aakash Educational Services:

Byju’s acquired Aakash in 2021 for a hefty sum, but the investors allege that the company has lost operational control, leading to integration challenges and financial losses.

Default on Byju’s Alpha (TLB loan):

The company reportedly defaulted on a $1.2 billion loan taken to fund its aggressive acquisition spree, raising concerns about its financial health.

Corporate governance issues:

The investors highlight the lack of a chief financial officer (CFO) and independent directors on the board, raising concerns about transparency and accountability.

Byju’s, however, has denied the allegations and called the lawsuit “frivolous and misconceived.” The company has stated that it is “confident of defending its position before the NCLT.”

The legal battle between Byju’s investors and the management is likely to have significant implications for the future of the company. If the investors succeed, it could lead to a major restructuring of the company’s board and management, as well as a change in its business strategy. This case is being closely watched by the Indian startup ecosystem and could set a precedent for corporate governance in the country.

It is important to note that this is a developing story, and the outcome of the legal case is yet to be determined.