Baiju founder makes last ditch effort to appease disgruntled investors | Tech Crunch

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Baiju Ravindran, founder of embattled edtech group Byjus, made a last-ditch effort to appease disgruntled investors, including Process Ventures. He informed them that the board was assessing renounced shares — shares that a group of investors had recently opted not to buy in protest to prevent dilution of their holdings — before confirming a recent rights issue that would have reduced the Indian startup's valuation. By 99%.

Once India's most valuable startup and the face of the local ecosystem, Baiju's future is at stake. A major bone of contention between Bangalore-based startup Byzoos and many of its investors stems from the rights issue the startup launched in late January after a year-long struggle to raise enough funding.

A rights issue is a way of raising capital by offering existing shareholders the opportunity to purchase additional shares at a discounted price in proportion to their current shareholding. By not participating in the rights issue, investors risk diluting their holdings in Byzoos to almost nothing.

Process, Peak XV, Chan Zuckerberg's initiative was not involved in the rights issue and is currently fighting the Bengaluru-headquartered startup legally to remove Ravindran from the company and invalidate the $200 million it was able to raise through the rights issue. The investors approached an Indian company court earlier this year, which ordered Baijus to move $200 million into an escrow account until the matter was resolved.

In an email to shareholders on Friday morning, a copy of which was reviewed by TechCrunch, Ravindran said the startup's board was considering making an offer to disgruntled investors despite the “hostility” they had displayed and “no legal action.”

Ravindran informed the shareholders that the startup has already received the 50% votes required to raise the authorized share capital of the startup to execute a fully-subscribed $200 million rights issue. Baijus held an extraordinary general meeting on Friday where it sought to pass a resolution on the rights issue. The outcome of the rights issue will not be known until April 6 and both parties will appear before the Indian company court again on April 4.

Byjus has been running against time despite cutting costs in recent quarters. Baiju needs the capital raised from the rights issue to continue its business operations. Resolving an ongoing dispute with its investors is also critical for the company to begin future fundraising efforts and maintain its financial stability.

“I have always built Byzoos in the spirit of equality and equity, and it is not my intention to leave out any investor, regardless of the size of their stake,” Ravindran wrote in an email on Friday. “Since the inception of this organization, my vision has been to take everyone from one milestone to another. And I believe we will overcome our challenges together.

Process, Peak XV and the Chan Zuckerberg Initiative abruptly resigned from Byzoo's board last year over its governance practices, and Deloitte fired the startup account. Prosys last year accused Byzoos of being “not sufficiently developed for a company of that scale” and that the Indian firm “ignored advice and recommendations” from its backers.

Byjus is still reeling from the consequences of its aggressive expansion strategy during the pandemic. The startup, which was valued at $22 billion in early March 2022, has spent over $2.5 billion to acquire nearly a dozen startups worldwide in just two years. The company had grand ambitions to go public at a valuation of more than $40 billion, but its plans were hit by a dramatic downturn in market sentiment after Russia invaded Ukraine.

Ravindran, admitted that he had made “mistakes” and is seeking another chance from his supporters to correct course. “Even my critics know that I have invested everything and more in this company,” he wrote on Friday. “So, I hope you see the value in continuing with Byzoos in the same spirit that you first joined our journey with.”

The article has been updated with additional details.



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