Byjus Rights Issue in Limbo as NCLT Suggests Extension, Company Hesitant

In a significant development, a company law court in India has asked Byju's, the embattled edtech giant, to consider extending the closing date of its USD 200 million rights issue. This request comes amid objections raised by estranged investors who flagged technicalities that prevented the closure of the issue on Wednesday.

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NCLT's Interim Order

The National Company Law Tribunal (NCLT), Bengaluru Bench, issued an interim order on February 27, directing Byju's to keep the funds received from the rights issue in a separate escrow account. The court emphasized that these funds should not be withdrawn until the matter is disposed of. Additionally, the NCLT suggested that Byju's consider extending the closure date of the rights issue to ensure that the rights of petitioners regarding the application for shares are not prejudiced.

Byju's Response

Despite the NCLT's suggestion, sources close to Byju's have indicated that the company will not extend the Wednesday timeline for the closure of the rights issue. They maintain that since there is no stay on the rights issue, it will proceed as planned.

Investors' Concerns

A group of investors, who collectively hold a significant portion of Byju's shares, have expressed concerns about the legality of the rights issue. They argue that the issue cannot go through without shareholders' authorization for an increase in share capital. It remains unclear whether these investors participated in the rights issue, which Byju's management has indicated will close as scheduled on Wednesday.

Allegations of Mismanagement

The investors' concerns come on the heels of allegations of mismanagement and financial irregularities at Byju's. On Tuesday, a group of investors alleged that the edtech giant siphoned off USD 533 million into an obscure hedge fund in the US. They sought a stay on the USD 200 million rights issue, calling it illegal and contrary to law.

Shareholders' Vote and Byju's Response

In a recent development, Byju's shareholders voted unanimously to remove Founder-CEO Raveendran and his family from the board due to alleged mismanagement and failures. However, the company dismissed this vote, claiming that it was conducted in the absence of the founders and is therefore invalid and ineffective.

Byju's Financial Struggles

Byju's, once a high-flying edtech startup, has faced several challenges in recent times. The return of students to physical classes post-pandemic and the acquisition of Aakash have put a strain on the company's finances. Additionally, Byju's has faced setbacks such as the resignation of its auditor, bankruptcy proceedings against a holding company, and a US lawsuit disputing a loan.

Byju's, once a shining star in India's tech startup ecosystem, now finds itself embroiled in legal battles and financial struggles. The company's rights issue and the allegations of mismanagement have raised concerns among investors and shareholders. As the situation unfolds, it remains to be seen how Byju's will navigate these challenges and regain its footing in the competitive edtech landscape.