Controversy over EGM results adds to edtech major Byju's troubles

After the controversial extraordinary general meeting (EGM) at Byju’s on Friday, differences have emerged on its resolutions, 

including the one on the removal of the chief executive officer (CEO) from the board.

The meeting was called by some leading investors such as Prosus and General Atlantic and there were seven resolutions at the EGM.

In a communication to his team members, CEO Byju Raveendran has pointed out only 35 of the 170 shareholders, representing only 45 per cent of the shareholding, voted in favour of the resolutions, showing the limited support that the “irrelevant” meeting received.

Sources added they had pointed out that was not even a simple majority and the EGM was illegal.

However, according to sources close to private-equity shareholders, 47 investors were present in the meeting. Those, according to them, represent 60 per cent holding in the company and 46 of them voted unanimously in favour of the resolutions—and they represent the largest institutional investors.

Sources say based on the EGM, shareholders holding 2.8 million votes and present in the meeting voted unanimously for the resolution. Of these some were invalidated by the scrutineer and 2.2 million votes were counted in favour of the resolution. One shareholder with approximately 15,000 votes had abstained.

According to sources in the company, its shareholders owned 4.78 million shares on fully diluted equity. But investors say the total shares, according to the latest information available with them, are 4.5 million.

The difference is based on calculation. While the investors have taken the votes in favour of the resolution as representing 2.8 million shares, those favouring the promoters say invalid votes cannot be included. The two also have different figures for shares.    

The seven resolutions include advising the board to consider changes in it -- having a board structure with nine members including one founder, two executives within the group, three shareholders, and three independent directors. It also seeks appointing a forensic expert to look into alleged breaches and removal of CEO Raveendran; his wife, Divya Gokulnath; and brother Riju Raveendran, and appointing an interim CEO, among others.

However, in an olive branch, the CEO wrote to his shareholders on February 21, just after the $200 million rights issue received a commitment, the firm was committed to restructuring the board by appointing two independent directors by the mutual consent of the founder and the shareholders right after the audit of the FY23 results, which are expected to come by the close of the quarter (March 2024 instead of the earlier commitment to file it by December end 2023).

He pointed out in a communication to the shareholders he believed that this would be in the best interests of the company and would allow greater engagement with shareholders.

Byju’s or its founder did not respond to queries. The investor group, which included Prosus and others, was not ready to talk on the issue.

In November last year, the Byju’s advisory board, which had former Infosys executive T Mohandas Pai and former State Bank of India chairman Rajneesh Kumar as members, mooted a proposal so that the promoters came to an understanding with the investors. That included appointing two independent directors and hiring a professional group president who, say sources, was identified. The plan was endorsed by the investors, who were willing to put in more funds in the company.

However, the two sides could not come to an agreement because investors said they would sink more funds in the company only after progress on management change and governance happened.

But CEO Raveendran wanted two things to be co-terminus --fresh funds coming in simultaneously with the appointment of board members.