Byjus in Hot Water: Investors Allege Mismanagement, Seek Halt to Rights Issue

Investors in Byju's, the Indian edtech giant, have accused the company of siphoning off USD 533 million into an obscure hedge fund in the US. They have filed a plea with the National Company Law Tribunal (NCLT) in Bengaluru, seeking a stay on a USD 200 million rights issue, calling it illegal and contrary to law.

Representative image

Investors' Concerns

The investors have raised several concerns about Byju's financial management and decision-making. They allege that the company transferred USD 533 million to Camshaft Capital Fund, a hedge fund founded by a 23-year-old with no formal training in investing. The founder of the investment firm reportedly owns several luxury cars, raising questions about the use of company funds.

The investors also dispute the valuation of Byju's at USD 200 million in the rights issue, which is significantly lower than the USD 22 billion valuation it commanded at one point. They argue that the rights issue is an attempt by the promoters to raise funds without providing adequate information to shareholders.

Byju's Response

Byju's has not publicly commented on the allegations made by the investors in the NCLT. However, the company had previously stated that the offshore subsidiary remains the beneficiary of the money invested in high-security fixed-income instruments with a multi-hundred billion-dollar fund in the US. It denied insinuations that it was no longer a beneficiary owner of the funds.

Legal Proceedings

The NCLT has asked Byju's to submit a written response to the investors' plea within three days and has reserved its order. The rights issue, which is scheduled to close on Wednesday, is in limbo as both sides argue over its legality and validity.

The allegations against Byju's and the ensuing legal battle have raised concerns about the company's financial management and corporate governance. The outcome of the NCLT proceedings will have significant implications for Byju's and its investors, as well as the broader edtech industry in India.