Byju’s Board considers renounced shares offer to soothe investor discontent

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Byju Raveendran, the founder of embattled edtech firm BYJU’S, in a letter to shareholders, claimed that the Board is considering making a share offer to investors that could help prevent any dilution of their shareholding.

In what is seen as an attempt to placate a group of estranged investors, that have taken the edtech founders to court to stop its proposed USD 200 million Rights Issue and sought a change in management and board of the company, Byju Raveendran informed shareholders early on Friday morning that there may be an offer of renounced shares to existing shareholders.

CNBC-TV18 has reviewed a copy of the letter that Raveendran sent to investor shareholders.

“I am aware that some of our valued existing shareholders were unable to participate earlier in the rights issue. In good faith the board is considering making an offer of renounced shares to existing shareholders to ensure that there is no more dilution to their shareholding. We will share more details with you shortly,” Byju Raveendran said in his letter to shareholders.

Renounced shares are shares that a company offers to shareholders at a discounted price to allow them to buy more shares.

In this letter, Raveendran reiterated that the USD 200 million Rights Issue was fully subscribed and closed last month, adding that the company had already secured more than the requisite 50 percent votes to increase its authorised share capital to enable the rights issue.

On March 7th, BYJU’s announced a postal ballot to secure the shareholders’ nod for increasing authorised share capital from Rs 6.5 crores to Rs 51.5 crores. The voting commenced on March 8, 2024, and will remain open until April 6, 2024.

“As you are aware, we closed the rights issue last month, which was a crucial step towards ensuring the sustainability and growth of our company in these challenging economic conditions. I am happy to inform you that, in response to the postal ballot which was announced on 7 March, we already got more than 50 percent votes to the increase in authorised share capital,” Raveendran said in his letter.

“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,” Raveendran said, adding that it has never been his intention to leave any investor behind, regardless of their shareholding size.

Raveendran alluded to the legal battle between the investors and founders in his letter, adding, “Despite the animosity shown by some of the investors in pursuing uncalled-for legal actions, we continue to show good faith towards all our shareholders and would like all of you to be part of our turnaround story… While we have received significant interest from third parties, our priority remains with our existing shareholders and hence we are looking at how we can extend this opportunity to all of you.”

Four investors including Prosus, General Atlantic, Sofina and Peak XV, with support from other shareholders like Tiger Global and Owl Ventures, moved NCLT to file an oppression and mismanagement plea against BYJU’s management and founders. These investors seek to stop the USD 200 million Rights Issue, claiming it was prejudicial to their interests as stakeholders.

As the order dates February 27, the NCLT directed the company that the “funds received by the Respondent Company (BYJU’s parent Think & Learn) in respect to the rights issue should be kept in a separate Escrow account and it should not be withdrawn till the disposal of this matter.”

The investor shareholders also sought a stay on the Extraordinary General Meeting called by BYJU’s on March 29 to increase the authorised share capital for the rights issue, but the NCLT on March 28 refused to grant investors any relief and allowed the EGM to proceed. The court will next hear the case on April 4.

Raveendran said he had invested his “everything, and even more, into this company,” and hoped that shareholders would see the value in continuing with BYJU’S in the same spirit with which they first joined its journey.

“The last two years were tough, but please be assured that our comeback will be stronger than our setback. No matter what it takes, we will ride home together. That which did not kill BYJU’S only made it stronger,” Raveendran signed off the letter.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow