Byju’s is struggling to raise the full $200 million due to rights issues over which the founders had previously claimed were oversubscribed, sources familiar with the matter told TechCrunch. And now India’s National Company Law Tribunal has barred the company from proceeding with a second rights issue amid allegations of shareholder oppression and mismanagement.
The tribunal also on Thursday ordered the company to maintain the status quo for existing shareholders until a petition filed by two investors, General Atlantic and Sofina, is disposed of.
Byju’s launched its first rights issue in late January, but after many investors opposed the fund-raising, a court order directed the company not to utilize the funds raised through the rights issue. The Bengaluru-based startup launched its fundraising drive after struggling to raise cash amid allegations of corporate governance failures, and its rights issues have nearly caused its valuation to plummet to about $25 million. This is a surprising decline compared to the startup’s once $22 billion price tag. enjoyed it
The startup recently tried to raise funds again following another rights issue to pay its employees and continue operations, but those efforts have now been halted. Rights issues allow companies to raise capital by giving shareholders the opportunity to purchase additional shares at a discount relative to their current stake.
Thursday’s court order is the latest in the dramatic collapse of Byju’s, once the world’s most valuable education technology startup. We are backed by some of the world’s most influential investors, including BlackRock, Prosus, Peak XV, UBS, Bond, Sands Capital, Verlinvest, Tencent, Canada Pension Plan, Tiger Global and the World Bank’s IFC.
Byju’s fortunes began to fade with the post-pandemic tailwind that had taken it to new heights some time ago. But things started to go seriously downhill last year when Prosus, Peak XV, and the Chan Zuckerberg Initiative resigned from the company’s board of directors, citing the company’s problems. Due to governance practices, Deloitte deleted the startup’s account. Prosus said Byju’s was not “advanced enough for a company of its size” and that the Indian company had “ignored the advice and recommendations” of its sponsors. Investors have been trying to remove the company’s founder and CEO Byju Raveendran from the company.
Some investors, including Prosus and Peak XV, have accused Byju’s of violating previous court orders and allocating shares to some shareholders despite the pending case. Byju’s was directed to provide allocation details and keep all funds raised in a separate escrow account.
TechCrunch could not confirm exactly how much funding Byju raised in its first rights issue. A representative for Byju did not respond to a request for comment.
“Our rights issuance has been fully approved and our gratitude to our shareholders remains strong,” Raveendran wrote in a letter to shareholders in February. In his letter, he urged estranged investors to give themselves another chance and engage in rights issues.
“But my criterion of success is the involvement of all stakeholders in rights issues. We built this company together, and I hope we all join in this new mission. Your initial investment laid the foundation for our journey, and this rights issue will help us preserve and build greater value for all shareholders.”
The court order comes after BlackRock canceled its investment in Byju’s, taking the Indian company’s implied value to zero.
