NCLT asks Byju's to consider extension of rights issue closure date

Rights issue extension unlikely: The National Company Law Tribunal (NCLT) has told embattled edtech firm Byju's to take into consideration if there could be an extension to the closing date of the $200 million rights issue.  However, the company law court’s request does not seem to be accepted by the Byju’s management, which has hinted that it would not accept it, even as estranged investors flagged technicalities that prevented the closure of the issue on Wednesday.

In an interim order dated February 27, the National Company Law Tribunal (NCLT), Bengaluru Bench said the funds received by Byju’s in respect to the rights issue should be kept in a separate escrow account and it should not be withdrawn till the disposal of the matter. 

"The respondent company... is to consider the extension of the closure date of the rights issue so that the rights of the petitioners with regard to the making of an application for shares under their rights entitlement does not get prejudiced," said the NCLT order. The next hearing has been listed for April 4. People privy of the matter said that the Wednesday timeline for closure of the rights issue will not be extended. Considering there is no stay on the rights issue, it will close as planned on Wednesday, the sources said.

Legal tangle 

A group of investors, holding a third of Byju's cumulatively have got into a legal tangle with the CEO and his family over mismanagement.  However, investors felt that the rights issue cannot go through in the absence of shareholders' authorisation for increase in share capital.

It is unclear if these investors participated in the rights issue, which the management has indicated will close as scheduled on Wednesday. Byjus’ investors had alleged on Tuesday that the edtech giant siphoned off $533 million in an obscure hedge fund in the US and sought a stay on a $200 million rights issue, calling it illegal and contrary to law. 

The rights issue through which promoters of Byju's are seeking to infuse funds into the startup, is to close on Wednesday and during the course of the hearing earlier the two sides cited technicalities on whether the rights issue could go ahead. On Friday, Byju's shareholders (prominent investors) had voted unanimously for removing Founder-CEO Raveendran and his family from the board over alleged "mismanagement and failures" at what was once India's hottest tech startup, but the company hit back calling the voting done in the absence of founders as invalid and ineffective.

More Extraordinary General Meetings 

Sources close to the investors had said more than 60 per cent of the shareholders voted in favour of all the seven resolutions at the EGM, which included removing the current management, reconfiguration of the board and a third party forensic investigation into acquisitions done by the company.

Contesting investors' claims, sources close to Byju's had put the number at 47 per cent on Friday. Prosus, which is one of the six investors who had called the EGM, in a statement last week had said shareholders unanimously passed all resolutions put forward for vote.

These included a request for the resolution of the outstanding governance, financial mismanagement, and compliance issues at Byju's; the reconstitution of the board of directors, so that it is no longer controlled by the founder of T&L; and a change of leadership of the company. The once-storied edtech startup, Byju's rose to dizzying heights before its perilous fall.

While the return of students to physical classes post-pandemic and the recent acquisition of Aakash put Byju's under a financial strain, the edtech firm in last one year suffered other setbacks, including its auditor resigning, lenders beginning bankruptcy proceedings against a holding company, and a US lawsuit disputing the terms and repayment of a loan. 

(With PTI inputs)