Byju’s founder floats share offer to make peace with estranged investors

Byju Raveendran, the founder of embattled edtech group Byju’s, has made a last-ditch attempt to placate disgruntled investors. He has just informed them that the board is weighing an offer of renounced shares — shares that a group of investors chose not to buy recently in protest — to prevent the dilution of their holdings ahead of validating a recent rights issue that cuts the Indian startup’s valuation by 99%.

Byju’s, once the most valuable startup in India, struggled to raise capital throughout last year after a group of investors including Prosus Ventures, Peak XV Partners and Chan Zuckerberg Initiative publicly expressed concerns about the startup’s governance practices. To save the cash-starved startup, Byju’s launched a rights issue in late January and raised $200 million. A rights issue is a way for a company to raise capital by offering existing shareholders the opportunity to purchase additional shares at a discounted price, in proportion to their current shareholding.

Prosus, Peak XV, Chan Zuckerberg Initiative didn’t participate in the rights issue and are currently legally fighting with the Bengaluru-headquartered startup to remove Raveendran from the firm. The investors reached an Indian company court earlier this year that ordered Byju’s to move the $200 million it raised via the rights issue to an escrow account until the matters are resolved. By not participating in the rights issue, the investors are risking getting their holdings in Byju’s dilute down to almost nothing.

In an email to shareholders Friday morning, a copy of which TechCrunch has reviewed, Raveendran said the startup’s board is contemplating making the offer to disgruntled investors despite the “animosity” they have displayed and their “uncalled for legal actions.”

Raveendran also informed the shareholders that the startup has already received over 50% votes required to increase the authorized share capital in the startup to take into effect the fully-subscribed $200 million rights issue. Byju’s held an extraordinary general meeting Friday, where it has attempted to pass the resolution over the rights issue.

It doesn’t appear that the investor group and Byju’s have been able to make any inroads in solving their differences. Representatives of Prosus, Peak XV and Chan Zuckerberg Initiative, investors that together own more than 15% of the startup, didn’t attend the extraordinary general meeting, according to two people briefed on the situation.

Byju’s declined to comment. Prosus, which is leading the estranged investor group, also had no comment.

“I have always built Byju’s with a spirit of equality and equity, and it has never been my intention to leave any investor behind, regardless of their shareholding size,” Raveendran wrote in Friday email. “From the very inception of this company, my vision has been to take everyone along, from one milestone to another. And it has always been my conviction that we will overcome our challenges together.”

Prosus, Peak XV and Chan Zuckerberg Initiative abruptly resigned from Byju’s board last year over the startup’s governance practices and Deloitte dropped the startup’s account.

“Even my critics know that I have invested my everything, and even more, into this company,” Raveendran wrote Friday. “So, I hope that you will see the value in continuing with Byju’s in the same spirit with which you first joined our journey.”