In a bid to restore investor trust, Byju's founder and CEO Byju Raveendran has unveiled a series of bold promises aimed at restructuring the company's governance and ensuring transparency in its operations. Raveendran's letter to shareholders comes amidst growing concerns among investors regarding the future prospects of the education technology giant.
In the letter, Raveendran acknowledged the challenges facing Byju's and outlined key measures to address them.
One of the most significant commitments announced by Raveendran is the restructuring of the company's board to increase shareholder representation. He pledged to appoint two non-executive directors to the board by mutual consent of the founder and shareholders, immediately following the conclusion of the FY23 audit, which he said is expected to be completed by the end of the current quarter.
Raveendran emphasised the importance of shareholders' participation in the rights issue. "I understand that participating in this rights issue may seem like a Hobson’s choice. However, this is the only viable option in front of us today to prevent permanent value erosion... To ensure transparency with regard to the usage of funds raised through the rights issue, we will appoint a third-party agency to monitor the same. This agency will report to all shareholders on a quarterly basis, within 45 days from the end of the quarter, along with commentary from the board," he wrote in the letter.
Adding to his points, Raveendran highlighted the fact that ownership of the company does not change pre and post a rights issue, making the question of valuation irrelevant. He stressed that the $200 million raised through this initiative would provide the necessary capital to address current liabilities and fuel growth to restore the company to its former glory.
Furthermore, Raveendran announced the launch of Byjus Wiz, an AI-powered tool designed to be a true study companion for students. This innovative platform integrates Byju's proprietary data accumulated over the last 8 years with Geogebra's math engine, boasting an impressive 99% accuracy in answers, surpassing any other model currently available globally.
Despite the challenges faced by Byju's, Raveendran expressed confidence in the enduring brand strength and future potential of the company. He urged shareholders to view the rights issue as an investment in their shared destiny and emphasized the collective effort required for success.
The letter came amidst reports of a possible shareholders meeting on Friday to oust the board led by the founder. According to a Times of India report, "The matters at the EGM will include a resolution of the outstanding governance, financial mismanagement & compliance issues, board reconstitution so that it is no longer controlled by the founders & a change in leadership of the company."
Here is Byju Raveendran's full letter to shareholders:
Dear Shareholders,
I am reaching out today to take you into confidence on certain pivotal steps towards a brighter future for our company. My deep sense of commitment is bolstered by your support as we embark on this new and exciting journey together.
Our rights issue is fully subscribed and my gratitude to my shareholders remains strong. But my benchmark of success is the participation of all shareholders in the rights issue. We have built this Company together and I want us all to participate in this renewed mission. Your initial investment laid the foundation for our journey and this rights issue will help preserve and build greater value for all shareholders.
I understand that participating in this rights issue may seem like a Hobson’s choice. However, this is the only viable option in front of us today to prevent permanent value erosion. I’m reminded of the words of Abraham Lincoln - “A house divided against itself cannot stand." We must stand together and act in the best interest of the Company.
A lot of media speculation has come about the pricing of the rights issue. Basis discussions, the board decided on a price that would be attractive to all shareholders without straining them. Our aim is for all shareholders to participate in this. We chose a rights issue as the most equitable way of raising capital without needing to ascribe a valuation. This is a well-established element of corporate capital raises. The ownership of the company does not change pre and post a rights issue, so the question of valuation itself is irrelevant as value preservation is maintained.
As the largest shareholder and provider of capital to the Company, it would have been in my best interest to price this rights issue high. But that would not be in the best interest of the Company. I have always placed my interests aside when I deal with our Company. I choose to go ahead and invest because of my belief in the resilience of our team and the strength of our business model to bounce back higher with even more rigour. Value is built, and I have always been a builder in addition to being a teacher.
This $200 million raise will give our Company the capital it needs to ensure that we can take care of the current liabilities and also provide sufficient growth capital to get us back to our former glory.
All of you are seasoned investors and know that building a company will see ups and downs. It has been a tumultuous time for startups worldwide, as the resilience of the company, employees and management have been tested. We remain, as we have been, "bloodied, yet unbowed". While the macro environment has changed, what hasn't changed is our faith and belief in the business. We will get through this and I, along with the team, will strive to create greater shareholder and stakeholder value. We have done it before and we shall do it again.
This belief is not based on hope alone. I say this with the confidence of the bootstrapped founder from ten years ago who took his startup from 0 to $22 billion with his blood, sweat and tears. The same intensity is being brought to the table with a renewed vigour.
The highest duty of an entrepreneur is to support the team and shareholders. I have personally put in $1.1 billion in the company over the last two years to pay salaries and maintain operations. I view this not as an obligation, but as my Dharma and duty. I have sacrificed everything to not fail in this duty.
My duty to my shareholders is still steadfast. In order to increase shareholder representation, I commit to restructuring the Board and appointing two non-executive directors to the Board by the mutual consent of the founder and shareholders; right after the FY23 Audit, which we expect to close by the end of this quarter. I believe this will be in the best interest of the Company and allow for greater engagement with shareholders.
To ensure transparency with regard to the usage of funds raised through the rights issue, we will appoint a third-party agency to monitor the same. This agency will report to all shareholders on a quarterly basis, within 45 days from the end of the quarter, along with commentary from the Board.
A few vested interests are misrepresenting our relationship as adversarial. Let me be unequivocal in stating that such narratives could not be further from the truth. There is nothing to be gained from conflict, especially with those who share our commitment and conviction towards our common cause. I refuse to let the self-serving actions of a few individuals cloud my judgment and pollute our relationship. I always choose gratitude, hope and action over lament, anguish or dejection. Entrepreneurship is the triumph of perseverance over pessimism.
Despite these headwinds we face as a company, there are tangible indicators of our enduring brand strength and future potential. The traffic on our website and apps has shown remarkable growth in spite of reduced marketing spends in the recent past. This is a clear testament to the value our users find in our services and the faith they put in our content. The negativity has affected perception of the brand, but consumer belief continues to grow. We are launching Byjus Wiz, an AI-powered tool designed to be a true study companion for students. Our AI model, trained with our proprietary data generated over the last 8 years and integrated with the Geogebra's math engine, delivers an impressive 99% accuracy in answers, surpassing any other model currently available globally. Brand BYJU’S is not just alive, it is also kicking.
The best course of action is for value to remain within our shareholder group. My belief in all your participation in this rights issue remains strong. This investment is an investment in our shared destiny and is the first step towards success. The amount, by design, will not strain shareholders, but will be of immense value to the company. It is a small step for you, but it will be a collective relief for all stakeholders, ensuring goodwill and hard work on the road ahead.
The rights issue is the right way forward and we look forward to you all joining us on this new journey.
Byju Raveendran
Founder CEO
(Edited by : Amrita)
First Published: Feb 21, 2024 10:31 AM IST
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
