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Corporate Governance Concerns Lead Byju’s Biggest Investor Prosus to Exit Board

Corporate Governance Concerns Lead Byju’s Biggest Investor Prosus to Exit Board

Written by Sanjay Kumar

BYJU’S

Educational technology company

  • Founders: Byju Raveendran, Divya Gokulnath
  • Revenue: 2,280 crores INR (US$290 million, 2021)
  • Founded: 2011
  • Subsidiaries: Byju’s Exam Prep, WhiteHat Education Technology, MORE
  • Headquarters: Bengaluru, Karnataka, India

Byju’s reporting and governance structures did not evolve sufficiently for a company of that scale, said the company’s biggest institutional investor, Netherlands-based Prosus. This critique emerged just a month after Russell Dreisenstock, the company’s board representative, resigned from his position at the edtech giant.

Prosus released an official statement on July 25, asserting that Byju’s executive leadership consistently disregarded advice and recommendations regarding strategic, operational, legal, and corporate governance matters.

The investor further clarified their reasons for Dreisenstock’s departure, explaining that he was unable to fulfill his fiduciary duty to serve the long-term interests of the company and its stakeholders.

In addition to Dreisenstock, two other investor board members, GV Ravi Shankar of Peak XV Partners (formerly Sequoia Capital India), and Vivian Wu of Chan Zuckerberg Initiative, had also resigned from Byju’s board recently.

Byju’s had previously maintained that the board resignations occurred due to the investors’ shareholding falling below the required threshold. Interestingly, this is the first instance where a board member publicly acknowledged differences between the company’s founders and former board members.

Reports highlighted the conflicts between Byju Raveendran and the three board members, which ultimately led to their resignations.

On the same day, Deloitte, a prominent global auditing firm, also tendered its resignation, adding to the growing list of troubles faced by the world’s most-valued edtech startup.

Addressing the situation, Prosus emphasized that Byju’s is a crucial investment in the domains of India and education, both of which are strategic areas of interest for the Netherlands-based investor.

Despite no longer having a representative on Byju’s board, Prosus expressed their continued belief in the company’s potential to revolutionize access to quality education in India and worldwide. As a shareholder, Prosus vowed to assert its rights and collaborate with other shareholders and government authorities to safeguard the long-term interests of the company and its stakeholders.

In September of the previous year, Prosus classified Byju’s as a non-controlling financial investment after their stake in the company fell to 9.67 percent. At that time, Prosus valued Byju’s at $5.98 billion, significantly lower than its previous official valuation of $22 billion.

Prosus attributed the decrease in valuation to changes in macroeconomic conditions that had affected technology sector valuations. They clarified that the fair value of their investment in Byju’s was determined by a third-party firm, as communicated to Moneycontrol.

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