When three board members of the troubled Bengaluru-headquartered edtech major BYJU's quit the board, it became clear that it is in a bad shape. All three investors—Peak XV Partners, Prosus and the Chan Zuckerberg Initiative—have, reportedly, confirmed the resignations of their representatives G.V. Ravishankar, Russell Dreisenstock and Vivian Wu respectively. As per a BYJU's spokesperson, there are talks about reconstituting its board, including the induction of independent directors after the exits.
Trouble at BYJU's was brewing for a long time. Experts told THE WEEK that the resignation of the board members has raised concerns and prompted an analysis of the company's current state. The resignations, coupled with the departure of auditing firm Deloitte, indicate potential governance issues within the company.
“The board members' resignations, including representatives from Prosus, Peak XV Partners, and Chan Zuckerberg Initiative, have resulted in a reduced board size, leaving only Byju Raveendran, Divya Gokulnath, and Riju Raveendran as directors. BYJU's attributes the need for board reconstitution to investors vacating seats due to falling shareholdings. These resignations, combined with Deloitte's departure as the company's auditor, raise questions about internal governance, decision-making processes, and potential conflicts within BYJU's. The absence of board members and an auditing firm may impact transparency, accountability, and overall corporate governance,” Gaurav V.K. Singhvi, an angel investor and co-founder of We Founder Circle, told THE WEEK.
This angel investor also felt that despite the rough patch, it is important to acknowledge BYJU's past successes, such as strategic acquisitions and market dominance. “The company's strong position in the edtech sector and its extensive user base provide a foundation that can be leveraged to overcome current challenges. Ultimately, BYJU's ability to address the recent developments and execute its strategic plans effectively will shape its future trajectory. The company must prioritise financial stability, transparency and regulatory compliance to regain trust and position itself for long-term success,” Singhvi said.
When THE WEEK contacted BYJU's for comment, the company's spokesperson remarked that BYJU's management has been engaging with investors in constructive discussions on the reconstitution of the board at BYJU's, including the induction of independent directors. “The need for reconstitution arose as few investors had to vacate the board seat due to their shareholding falling below a minimum required threshold as per our SHA. We want to reassure all stakeholders that we are actively working towards constituting a diverse and world-class board commensurate with the company’s size and scale,” BYJU's spokesperson stated.
Market expert point out that the current developments at BYJU's aren't surprising as the ed tech companies overestimated the future prospects of their products and are now coming to terms with the reality of phygital environment. Beside the money from the PEs, the companies have leveraged debt to finance their operations.
“All the companies have been facing challenges of revenue flow and hence are under stress to optimise their operations. Hence they have shut down projects and been pressing the pedal to the maximum limit on sales and marketing. BYJU's is no exception. Enterprises are respected and live long when they follow high standards of governance in all aspects of their business, starting from finances and operations to sales, marketing and customer service. This is not a onetime activity, rather to be practised on an ongoing basis, each day of a leader’s life at work,” Aditya Narayan Mishra, director and CEO, CIEL HR, told THE WEEK.
Experts further point out that the current state of BYJU's may affect funding in the startup ecosystem in India. “Being one of the most valued tech startup, BYJU's will certainly have issues in managing the resignation of auditors and directors more as a dip in investor confidence in the entity particularly when an IPO is being planned in the group of Aakash. At the same time, the level of investments and the deep penetration BYJU's has across India would help them in sailing through a tough season of scrutiny. While BYJU's may still go over this challenge, tech startups will have a investment winter given the global outlook coupled with this confidence dipping time on tech startups,” said Subramanyam Sreenivasaiah, CEO at Ascent HR.
Few market experts feel that things have horribly gone wrong with BYJU's as there are signs of a complete breakdown of corporate governance in the company. “In the 1990s, a new wave of entrepreneurs came by on the firmament, who set up sterling record of corporate governance in India. Till then, it was unbeknownst in India. And that set the tone of India’s emergence place for startup destination. Unfortunately, the seeds of brashness were also sown at the same intervals. While there are many, BYJU's is the the poster boy of all things that could have gone wrong, have indeed gone wrong horribly,” said Alok Shende of Mumbai based Ascentius Consulting.