ED-TECH

Byju’s most eventful week:

Boardroom manoeuvres, mass
firings, government enquiry,
shareholder revolt
By Salman SH Jun 30, 2023, 04:00 AM IST

Byju Raveendran, CEO and co-founder, Byju's; illustration by Sadhana Saxena

Synopsis

Founder Byju Raveendran remained his boisterous self in the town hall on Thursday. In his address to
employees to allay concerns about the spate of bad news that has engulfed the company, there was no
mention of ongoing mass firings. He was least apologetic and he said “funding winter or summer we will
raise money”, as per those who attended the meeting.

Founder couple of Byju’s, Byju Raveendran and Divya Gokulnath, hastily left their
Dubai residence and jetted off to Bengaluru early this week. Their urgent mission:
to restore order and address the mounting challenges within the organisation.

The chaos and confusion have gripped their offices with a barrage of bad news
pouring in the past one week alone. Board members’ resignation, auditor’s exit,
government investigation, court battle with debtors, default on provident fund
contribution payment; the company had a truckload of troubles to resolve in the
past few days alone.

Their first order of business involved a crucial meeting with Mrinal Mohit, the
current chief operating officer who has effectively assumed the quasi-CEO role for
Byju's India operations. Inside sources close to Byju's management reveal that
Mohit has been steering the entire Indian business over the past few months, as
Raveendran crisscrossed continents pursuing a large external funding round
worth USD1.5 billion.

However, these talks with investors have been abruptly halted as Raveendran and
Gokulnath touched down in Bangalore, driven by the urgent need to pacify anxious
senior executives and existing investors who have been relentlessly demanding
answers.

Remote firings
Meanwhile, within Byju's secondary office located in Bengaluru's Whitefield, an
air of tension has permeated the atmosphere.

This office primarily accommodates the sales and marketing team responsible for
the southern region, while the operations team, senior executives, and
management team are housed in the corporate office at Bannerghatta's IBC
Knowledge Park.

A sales team leader from the Whitefield office, entrusted with managing around
100 field sales associates told ET Prime that a specific directive was issued by his
general manager (GM) on Monday evening: they were expressly instructed not to
report to the office on Tuesday.
In fact, many team leaders
and their associates
"When you take on a debt of received the directive from
USD1.2 billion, you need to have their managers to remain
at home for the entire
a CFO in place, who joined
week, as the edtech giant
Byju's much later. Term loan plunged into its fourth
lenders typically demand high round of layoffs within a
financial accountability. In single year.

some ways, these term loan "On Monday evening, I

lenders are the corporate received a text message
equivalent of loan sharks; they from my GM, instructing
thrive on legal battles." me to work from home the
following day. I was well
— An investment banker familiar with Byju’s aware that my tenure as a
condition
Byju's employee had
reached its conclusion,
mentally preparing myself
for what lay ahead. The next morning, via a Google Meet session, the HR head and
my GM informed me that my job had been rendered redundant, and they would
provide a severance pay equivalent to two month's salary," said a Byju's employee,
asking not to be named.

Over the course of the past two weeks, numerous such incidents of layoffs have
unfolded. The Whitefield and Bannerghatta offices in Bengaluru, during this
period, assumed an eerily vacant appearance, as management endeavoured to
sidestep any potential outbursts within the premises.

"In previous instances of layoffs, emotions ran high, resulting in confrontations

and employees summoning law enforcement due to the abrupt nature of their
dismissals. To avert any such untoward incidents, it appears that HR and
management have opted for a new approach: directing employees to work from
home during these episodes of downsizing," added the employee mentioned
earlier.

According to multiple sources with close ties to the company's management,

Byju's has already fired thousands of employees. Another key figure within the
organisation, a senior executive responsible for overseeing sales efforts, revealed to
ET Prime that he personally supervised the termination of approximately 650
sales associates and an additional 250 assistant sales managers in the space of two
weeks.

"As part of the downsizing, I had to let go of numerous senior associates and sales
managers across the country. Some of them were long-serving employees with
substantial salary packages exceeding INR32 lakh per annum. Overall, the layoffs
have impacted at least 1,000 employees solely within the sales team," added this
executive speaking on condition of anonymity.

The default on EPFO (Employees' Provident Fund Organisation) contributions

further caused panic among employees. The previously quoted executive
mentioned that the payroll team has yet to process Form-16 documentation for
many employees, leading to confusion and worry. Soon after the PF contribution
payment default became public, the company paid dues worth INR123 crore on
Wednesday.

A spokesperson from Byju's stated that the complete amount visible on the PF
portal has been paid.

In the current wave of layoffs, three highly reliable sources have confirmed that a
staggering 4,000 employees will be impacted across all business functions and
subsidiaries.

Responding to ETPrime’s queries, a spokesperson from Byju’s did not confirm or

deny whether 4,000 employees were impacted in the latest round of layoffs.

“The restructuring exercise this month has impacted less than 1,000 full-time
positions. Contractual staff are hired on a need basis to support specific projects or
operational requirements, and the number of contractual employees can fluctuate
on a monthly basis,” the spokesperson added.

Excluding the latest firing, in multiple rounds, Byju’s terminated 15,000 people
within the past year. It is estimated that about half of its workforce were on
contract deployed by staffing firms such as Randstand. It's on-roll employee count
at present is likely around 12,000.

Battle at Delaware
This steady downsizing drive is in progress amid a court battle with the company’s
lenders in the US. The lenders contested the transfer of USD500 million from
Byju’s US subsidiary to other entities. They alleged that the company concealed
this information from them. The group of lenders also accused Byju's of repeatedly
failing to provide the promised consolidated financial data, guarantees, and
collateral.

Consequently, the delay in certifying their FY22 financial filings not only led to
Deloitte's resignation but also prompted the term loan lenders to demand pre-
payment of nearly 85% of the USD1.2 billion principal. Byju’s escalated the dispute
with lenders by choosing not to make the contractually mandated interest
payment of USD40 million.

An investment banker familiar with Byju's and its past M&A transactions
expressed that Raveendran’s decision to withhold interest payments indicates a
willingness to engage in a legal battle that could have been avoided. The banker
further noted that Raveendran, who previously dealt mainly with venture capital
investors, may have underestimated the financial management challenges
associated with a substantial loan of USD1.2 billion.

"When you take on a debt of USD1.2 billion, you need to have a CFO in place, who
joined Byju's much later. Term loan lenders typically demand high financial
accountability. In some ways, these term loan lenders are the corporate equivalent
of loan sharks; they thrive on legal battles. By taking them on in court, assuming
he could win, Raveendran may not realise that this class of investors has the power
to dismantle his company, sell it in parts, and recover their money without the
equity investors having any control over it," cautioned the banker.

Wanted: money, managers

A huge matter of relief came by way of a Delaware court dismissing creditors’
petitions. But that need not be seen as the end of its court battles in the US.

In an effort to boost employee morale, Byju Raveendran himself led a virtual all-
hands meeting on Thursday morning. During the hour-long call, he outlined the
steps the company plans to take to address any concerns among employees.
However, despite expectations, Raveendran did not mention the layoffs at all,
leaving some employees disappointed, according to at least three employees that
ET Prime spoke with.

During the call, Raveendran shared positive news that four out of the six
subsidiaries of Byju's are currently profitable or have achieved break-even. This
includes US subsidiaries Osmo and Tynker, as well as Indian subsidiaries Great
Learning and Aakash. He also emphasised that his top priority at the moment is to
secure a significant funding round, expressing confidence in the company's ability
to attract investment regardless of market conditions.

"It doesn't matter if it is funding winter or funding summer, we will always

succeed in raising funds," Raveendran thundered on the call.

One employee who attended the call shared their perspective, saying, "Byju's
sounds like a different man now completely after this episode of bad news
emerging against his company. He sounds a bit arrogant and overconfident,
especially because he did not sound apologetic at all about the state of affairs in
the company… He has, however, promised that he would look to constitute a new
board of directors soon enough and would likely close this on priority within
weeks."

Raveendran assured the team that the departures of the three board members
were unrelated to Deloitte's resignation, and he emphasised that their exits were
amicable and based on mutual understanding. He reassured employees that he
would remain the largest shareholder in Byju's despite multiple funding rounds.

Byju concluded the speech by expressing optimism for the future and emphasised
that “the best of Byju’s is yet to come”. He highlighted that the company has “not
come this far to only come this far”.

In short, Byju’s badly needs a fresh infusion of cash to tide over its present crisis.
The three sources mentioned earlier in the story said that Byju’s currently has
around USD900 million cash in the bank, and that the company is reserving a
large amount of this just to make payroll and vendor payment for the next few
months.

Sources also added that several expansion projects and marketing campaigns that
were planned especially for Byju’s offline tuition centres have been stopped since
this was dependent on the USD700 million to USD1 billion funding that was
supposed to come in by June 2023. The same sources said that revenue generation
from these offline tuition centres are down considerably ever since the launch in
January 2023.

Responding to the questions about the cancelled expansion plans, a Byju’s

spokesperson said that some of its expansion projects and marketing campaigns
have been adjusted as part of a “strategic approach to prioritising profitability and
organic awareness”.

Amidst this crisis, CFO Goel who came on board just three months ago has become
Raveendran’s most trusted troubleshooter. There is a talk that Goel might even get
appointed as a board member. Raveendran is on the lookout for more senior
executives to strengthen Byju’s managerial bandwidth.
Arjun Mohan, who was part of the founding team at Byju’s who had left to become
CEO of UpGrad’s India division, is expected to return to the company soon. He had
quit UpGrad earlier this year.

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