Byju’s woes worsen: Rajnish Kumar, Mohandas Pai to step down from advisory panel

Kumar and Pai, who had joined the company last year to advise founder Byju Raveendran following a series of board exits and financial woes, have communicated their decision to him, according to two executives privy to the development.

Byju’s had established the advisory panel naming Kumar, a former chairman of the State Bank of India, and Pai, former chief financial officer of Infosys, as members to assuage investors worried about the company’s future as legal cases mounted against it.

One of the reasons behind both Kumar and Pai snapping ties with Byju’s, according to one executive, is on account of the company getting embroiled in litigation. Byju’s is facing lawsuits both in India and in the US from its creditors and key shareholders, who want the founder ousted.

The advisory panel’s three main focus areas were to get the company to disclose its audited financials and help Raveendran rebuild the team. Better communication with shareholders was the third part. 

On each of these aspects, Byju’s started well “but unfortunately, the company got embroiled in all kinds of litigation", said the executive.

A second executive, also speaking on condition of anonymity, said that in addition to the three areas, the advisory panel also worked with Raveendran to expand the board and change the composition of the board committee and help Byju's on settling debt with creditors.

An email sent to Byju's seeking comment went unanswered.

Late on Sunday, Kumar and Pai said in a joint statement that their engagement with Byju’s as advisers was always on a fixed-term basis for a year. 

“Based on our discussions with the founders, it was mutually decided that the tenure of the advisory council should not be extended. Though the formal engagement concludes, the founders and the company can always approach us for any advice. We wish the founders and the company the very best for the future," they said.

Escalating crisis

Kumar and Pai snapping ties from Raveendran is another setback to Byju’s, once the most-valuable homegrown unlisted company, estimated to be worth $22 billion in 2022. 

Earlier this year, Blackrock, an investor in the company, slashed Byju’s valuation to $1 billion, while another investor, Sequoia Capital (now Peak XV Partners), has written off its investment in the online tutor.

The advisory panel was set up in July last year after G.V. Ravishankar of Peak XV Partners, Vivian Wu of Chan Zuckerberg Initiative, and Russell Dreisenstock of Prosus resigned from the board of Think and Learn citing poor corporate governance. 

Byju’s statutory auditor at the time, Deloitte Haskins & Sells, also resigned, citing delays in the company sharing information with it.

Byju’s inability to raise more money from investors has forced the company to let go of thousands of employees, even leading to delays in salaries being paid to its staff. Last month, Byju’s India chief executive Arjun Mohan stepped down merely seven months after joining the company.

Raveendran, his wife, Divya Gokulnath and Raveendran’s brother, Riju Raveendran, are the three members of the board.

Multiple legal cases

Byju’s was sanguine when it set up the advisory panel last year.

“This council will play a pivotal role in advising and mentoring Byju’s board and its chief executive officer Byju Raveendran on crucial matters that shape the company’s future," Think and Learn had said in a statement in July last year.

Earlier this year, many of Byju’s shareholders, including Prosus, voted to oust Raveendran as the CEO at a special shareholder meeting. Byju’s rejected the move, saying the shareholder meeting was “invalid and ineffective". The matter is now before the Karnataka High Court, which is still to adjudicate on the matter.

There are multiple insolvency proceedings as well before the National Company Law Tribunal.

Byju’s has struggled to end its long-running dispute with Glas Trust Co., the trustee representing 37 lenders in the US, over the missing $500 million from the $1.2-billion loan the edtech company took. Multiple lawsuits across Delaware, New York and Miami have been filed by both the lender and Byju’s.

The company’s plans to raise money by selling many of the businesses it acquired during the covid-19 pandemic have remained a non-starter amid mounting legal and financial challenges. 

Last month, a majority of the company’s shareholders approved a $200-million rights issue, at a 99% lower valuation, but Byju’s cannot use the funds until the hearings at the NCLT and the Karnataka High Court are concluded.

Byju’s is yet to file its financials for 2022-23. When the company finally filed its financials for FY22 in January this year, it reported a loss of ₹8,245 crore on revenue of ₹5,015 crore.