Prosus slams Byju’s after quitting board, says India’s top startup ‘regularly disregarded advice’
Prosus, one of the largest investors in Byju’s, expressed its disappointment in the edtech giant’s reporting and governance practices on Tuesday, a month after the all the key investors quit the startup’s board. Prosus said in scathing a statement on Tuesday that Byju’s reporting and governance structures “did not evolve sufficiently for a company of that scale,” and the Indian firm “disregarded advice and recommendations” from Prosus’ director despite repeated attempts.
Prosus, the largest external investor in the Bengaluru-headquartered startup, said its director, Russell Dreisenstock, stepped down from Byju’s board after it became clear that “he was unable to fulfil his fiduciary duty” to serve the long-term interests of the company and its stakeholders.
The move follows three key Byju’s key investors — Sequoia India, Prosus and Chan Zuckerberg Initiative — quitting the startup’s board last month. Byju’s, which at $22 billion valuation is India’s most valuable startup, downplayed the significance at the time, saying the directors “had to vacate” the board because their shareholding fell below the minimum threshold set in the shareholding agreement.
Trouble is mounting at Byju’s. Global auditor Deloitte also quit the startup last month, saying it had not received “any communication” from Byju’s on the status of “audit readiness of the financial statements and the underlying books and records for the year ended March 31 2022.”
Byju’s, which has raised over $6 billion altogether, has spent over $2.5 billion in recent years to aggressively expand globally in a move that rattled some of its investors, according to people familiar with the matter. As the market conditions shifted, the startup has had to postpone its listing plans, lay off thousands of employees and scramble for other ways to cut costs.
The Tuesday scathing statement from Prosus is remarkable for many reasons. Prosus is one of the earliest backers of Byju’s and has never sold any of its shares in the company. The Netherlands-headquartered investment group, which has also cut the worth of its stake in Byju’s in recent quarters, said today that it has invested billions in India and remains a “long-standing and committed supporter” of Indian entrepreneurship.
“While the companies and sectors we work with in India and across the globe are high-growth and rapidly evolving, our stakeholders rightly expect that we hold ourselves and our investee companies to the highest standards of corporate governance and reporting,” it added in a written statement.
The statement adds:
BYJU’S grew considerably since our first investment in 2018, but, over time, its reporting and governance structures did not evolve sufficiently for a company of that scale. Despite repeated efforts from our Director, executive leadership at BYJU’S regularly disregarded advice and recommendations relating to strategic, operational, legal, and corporate governance matters. The decision for our Director to step down from the BYJU’S Board was taken after it became clear that he was unable to fulfil his fiduciary duty to serve the long-term interests of the Company and its stakeholders.
BYJU’S sits at the intersection of India and Education, two very important and strategic areas of investment for Prosus. Although we no longer have a representative serving on the Board of the Company, we continue to believe in the potential of BYJU’S and its role in revolutionising access to quality education in India and around the world. As a shareholder, Prosus will continue to assert its rights, collaborating with other shareholders and government authorities to safeguard the long-term interests of the Company and its stakeholders.
In a statement, a Byju’s spokesperson said of Prosus’ comment: “We have noted the observations of our valued investors. We have updated our shareholders about definitive steps taken to improve corporate governance and financial reporting.”
