Latest government investigation point to deficiencies in Byju’s corporate governance but cleared the struggling online education startup of financial misconduct. According to sources familiar with the yearlong probe conducted by the Ministry of Corporate Affairs, there was no evidence of activities like fund diversion or financial manipulation. However, the investigation did uncover governance lapses that have contributed to the company’s increasing losses, according to the Economic Times.
The findings provide some support for Byju Raveendran, the once-celebrated founder who has faced accusations of mismanagement from disgruntled investors. Last year, three shareholders, including Prosus Ventures and Peak XV Partners (formerly Sequoia Capital India), departed from Byju’s board due to disagreements with Raveendran over business processes and internal controls. The report also temporarily halts any potential new regulatory scrutiny on the company from Indian authorities.
Representatives from the corporate affairs ministry, Byju’s, Peak XV, and Prosus did not respond to requests for comment.
Governance and leadership challenges at Byju’s
The report does not directly attribute blame to Raveendran for the governance shortcomings or address his qualifications to lead the company. Investors seeking his removal have cited concerns over management and compliance failures.
Despite these findings, the report does little to alleviate Byju’s broader challenges. The startup, which expanded rapidly but remains unprofitable, has faced financial strain and a significant drop in its valuation. It is currently embroiled in multiple legal disputes in both India and the United States.
The investigation highlighted weak corporate governance and compliance practices at Byju’s, exacerbated by changes in funding dynamics, which have contributed to its mounting losses. Investigators also noted a failure to bring in financial and compliance professionals to oversee operations, further exacerbating financial difficulties.
Challenges amidst strategic shifts at Byju’s
The report also noted that Byju’s did not fully disclose acquisition details to all directors and frequently called meetings to approve such deals on short notice. However, it acknowledged the rationale that some directors were also investors in competing companies.
At its peak, Byju’s was valued at $22 billion, bolstered by a surge in business during the COVID-19 pandemic. However, as pandemic-related restrictions eased, its financial position weakened, leading to several bankruptcy cases both domestically and internationally. Despite raising over $100 million from existing investors through new share issuances, an Indian court has barred the company from utilizing these funds.
As founder Raveendran endeavors to rebuild Byju’s core business, he is focusing on leveraging generative artificial intelligence for personalized learning tailored to individual student needs. Simultaneously, he is grappling with financial pressures, including personal debt, as he strives to sustain the company’s operations.
