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Byju's is in early negotiations with potential new owners for a $1 billion (approximately Rs. 8,200 crore) financing round, attempting to thwart moves by certain investors to limit founder Byju Raveendran's authority over the struggling software business.
To entice new investors, the Indian business is promising perks such as preferential treatment in the event of liquidation, according to people familiar with the subject who asked not to be identified because the information isn't public. According to the sources, none of its existing shareholders have a so-called liquidation preference. Byju's, which has been attempting to secure new funding for months, hopes to conclude a round within two weeks, according to the company.
It's uncertain if Raveendran will eventually win a financial infusion, a vital step in a larger push to preserve control of a company that was once called India's most valuable, valued at $22 billion (approximately Rs. 1,80,321 crore). After the post-Covid online education market stalled and the business missed deadlines for publishing results and interest payments on a $1.2 billion (approximately Rs. 99,274 crore) debt, powerful shareholders and creditors began moving to restrict his influence.
Peak XV, Prosus NV, and the Chan-Zuckerberg Initiative members resigned from the board the same week Deloitte Haskins & Sells resigned as Byju's auditor, highlighting a fast erosion of confidence among the company's ranks.
Investors that are dissatisfied
According to the persons, the business has been resisting efforts from a few investors to divest Raveendran of some of his privileges granted through a shareholders' agreement, including a right of first refusal on investors looking to sell their shares. According to the persons, the investors were discussing possibilities such as combining some of Byju's with competitors in equity agreements.
Meanwhile, the founder enjoys the support of some of the startup's current owners, who control a sizable voting bloc with Raveendran. According to the sources, Raveendran and Chief Financial Officer Ajay Goel conducted a call over the weekend to convince investors that the fundraising is on track and that long-delayed financial statements will be finalised shortly.
However, they warned that extended delays in completing the expected stock raise might jeopardise the founder's influence over the company.
After breaching the conditions of its debt deal, Byju's and its lenders are litigating over the $1.2 billion (approximately Rs. 99,274 crore) term loan. It chose to skip an interest payment on the loan earlier this month and filed a lawsuit in New York saying that a group of investors staged a phoney financial crisis to extort money from the company.