“The decision for our director to step down from the Byju’s board was taken after it became clear that he (Dreisenstock) was unable to fulfil his fiduciary duty to serve the long term interests of the company and its stakeholders,” Prosus said in a statement.
“Byju’s grew considerably since our first investment in 2018 but, over time, its reporting and governance structures did not evolve sufficiently for a company of that scale,” Prosus said. Sources, however, said that the company which currently holds about 9.6% stake in Byju’s has no plans to exit the startup.
In a statement, Byju’s said that it has noted the observations of its investors. “We have updated our shareholders about definitive steps taken to improve corporate governance and financial reporting,” a company spokesperson said.
Prosus which has infused $536 million into the edtech startup since 2018 has marked down the company’s valuation to $5.1 billion. At its peak, Byju’s was valued at $22 billion. Prosus said that as a shareholder in Byju’s, it will continue to assert its rights, collaborate with other shareholders and government authorities to safeguard the long-term interests of the company and its stakeholders. “Byju’s sits at the intersection of India and education, two very important and strategic areas of investment for Prosus. Although, we no longer have a representative serving on the board of the company, we continue to believe in the potential of Byju’s,” the firm added.
The development comes at a time when Byju’s has already come under the scrutiny of the authorities with the Ministry of Corporate Affairs understood to have ordered an inspection of its books. The resignation of the startup’s auditor Deloitte over the delay of its FY22 results and three of its board members—representatives of Peak XV Partners (formerly Sequoia India and South East Asia), Prosus and Chan Zuckerberg Initiative have deepened the crisis at Byju’s which was once the top pick for investors who collectively infused over $5 billion into the company.
As it attempts to fix its corporate governance practices amid rising stakeholder concerns, the Bengaluru-based startup recently roped in former State Bank of India Chairman Rajnish Kumar and former Infosys CEO and early investor TV Mohandas Pai to steer its advisory council which has been tasked with advising the company’s board and CEO Byju Raveendran.
Interestingly, the statement by Prosus comes a day after the steering committee of the ad hoc term lenders who collectively own more than 85% of Byju’s $1.2 billion term loan said that it will collaborate with the startup to rework the loan terms by August 3.
The startup’s tussle with lenders which had reached the courtroom was a cause for concern for its stakeholders and a resolution of the issue should spell some relief for them.