Prosus, one of the long-standing investors in India, issued a statement today calling out the ed-tech startup, Byju's, for not evolving sufficiently in its reporting and governance structures. This comes just weeks after all independent board members resigned from the startup that has been under scrutiny for the past year.
Despite repeated attempts of course correction, Prosus' director Russell Dreisenstock felt the need to step down from Byju's board as it became apparent that he was 'unable to fulfill his fiduciary duty to serve the long-term interests of the company and its stakeholders'.
The statement also underlined the Bengaluru-based startup’s failure to incorporate and accept suggestions from the director relating to strategic, operational, legal, and corporate governance matters. Prosus also called out the executive leadership at Byju’s for ‘regularly disregarding advice and recommendations’.
Byju’s, once valued at $22 billion, was deemed to be one of the fasting growing startups in India. However, over time ‘its reporting and governance structures did not evolve sufficiently for a company of that scale’.
The company had earlier soft-pedalled the reason why members from Sequoia India, Prosus, and Chan Zuckerberg Initiative had abruptly walked out from the startup’s board, saying the directors ‘had to vacate’ the board because their shareholding fell below the minimum threshold set in the shareholding agreement.
Highlighting Byju's role in revolutionising access to quality education in India and around the world, the tech investor says it continues to believe in the potential of the startup despite no longer having a representative serving on the board. "Byju's sits at the intersection of India and education, two very important and strategic areas of investment for Prosus," concludes the statement.
Naspers-owned Prosus has pumped a whopping $536 million into Byju's since 2018. In April 2021, it made an investment amounting to $153 million in India's largest education technology company.
"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," says a Byju's spokesperson.
Adding to its woes, Byju's statutory auditor Deloitte Haskins & Sells, which was appointed as the company’s auditor till 2025, also quit citing a long delay in the startup's financial statements for the year ended March 31, 2022. "As a result, there will be a significant impact on our ability to plan, design, perform, and complete the audit in accordance with applicable auditing standards," Deloitte said in its resignation letter.
Going overboard with acquisitions over the past couple of years, aided by heavy investor funding to the tune of over $2 billion since the onset of the pandemic, it has hit Byju’s where it hurts. Amid mass firings, delayed financial results, and a standoff with creditors, it is yet to be seen where the world’s most valued education unicorn is headed.