Prosus raises concerns about BYJU’S reporting and governance, citing disregarded advice

• ByStartupStory     |    July 25, 2023

“Executive leadership at BYJU’S regularly disregarded advice and recommendations relating to strategic, operational, legal, and corporate governance matters,” stated Prosus NV, an investor in edtech giant Byju’s. The company expressed strong dissatisfaction with the top management, accusing them of consistently ignoring advice on critical matters despite repeated efforts by Prosus’ former director to improve governance.

Following Prosus’ significant reduction of Byju’s valuation from $22 billion to $5.1 billion, the company faced public criticism concerning its performance and management practices.

Russell Dreisenstock, a director representing Prosus, resigned from Byju’s board last month due to concerns about his inability to fulfil his fiduciary duty in serving the long-term interests of the company and its stakeholders, as cited by Prosus.

In response to Prosus’ accusations, Byju’s acknowledged the challenges and reassured shareholders of their commitment to taking decisive measures to enhance corporate governance and financial reporting.

The situation has become increasingly critical, as the strong criticism from Prosus, a major stakeholder with 9.6 per cent ownership in Byju’s, has raised serious concerns about the startup’s management practices. Adding to the concerns, Byju’s also faced issues with Deloitte, the audit firm that was initially contracted to oversee its financial statements until 2025. Deloitte decided to part ways with the company due to significant delays in receiving the financial statements. The lack of timely and accurate financial disclosures raised doubts about the company’s financial health and impeded Deloitte’s ability to carry out a thorough audit.

As part of its efforts to reduce costs and improve liquidity after laying off thousands of employees this year, Byju’s has downsized its office spaces in Bengaluru.

Despite being previously celebrated as India’s most valuable startup, Byju’s is now grappling with a series of challenges, including legal and financial issues. The company’s troubles have escalated further with reports of significant employee layoffs this year.

Notably, Byju’s has prominent investors like General Atlantic and BlackRock, but recent weeks have seen resignations from its auditor and multiple investor board members.

With major stakeholders expressing growing dissatisfaction, Byju’s is facing a potential risk to its reputation, and doubts have arisen about its future growth prospects.

In its statement, Prosus also pointed out concerns about Byju’s reporting and governance structures, emphasizing that they have not kept pace with the company’s significant growth.

As events continue to unfold, Byju’s is confronted with a crucial challenge of restoring investor confidence, enhancing its governance practices, and effectively addressing the legal and financial issues it is currently facing. The company’s ability to navigate these challenges will be instrumental in shaping its future trajectory.

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