For Byju’s, $200 million is so near yet so far

Mumbai: The National Company Law Tribunal (NCLT) on Wednesday asked edtech company Byju’s to consider extending the closing date of its contentious rights issue beyond 28 February, and directed it to keep the funds untouched.

A person familiar with the company’s thinking, however, said on condition of anonymity that it will not extend the deadline since the court only asked it to “consider” an extension, but did not direct it do so.

The funds collected through the rights issue will be kept in a separate escrow account and will not be used for any purposes and it “should not be withdrawn till the disposal of the matter”, the tribunal’s Bengaluru bench said.

Byju’s now needs to call an extraordinary general meeting (EGM) within 30 days and secure 51% of the votes to expand its authorized share capital. The court noted that Byju’s had already given an undertaking not to allot new shares without increasing the authorized share capital of the company, as per the provisions of the law. The tribunal will hear the matter next on 4 April.

The NCLT also expanded the scope of the investigation by seeking written submissions within two weeks from markets regulator Sebi, banking regulator Reserve Bank of India, the corporate affairs ministry and the registrar of companies.

Separately on Wednesday, the court also issued a notice to Byju’s on its lenders’ petition to invoke insolvency to repay around $1.2 billion worth of loans that the company had raised first in November 2021. Its lenders have accelerated the repayment of the $1.2 billion loan, which Byju’s is contesting.

Byju’s investors Prosus NV, Peak XV Partners, General Atlantic, and Sofina SA had jointly filed a petition with the NCLT last week against the rights issue, citing oppression and mismanagement of the company. The four investors who collectively hold around 25% stake in Byju’s had sought interim relief on the grounds of alleged financial mismanagement and siphoning of funds by the management, according to court arguments on 27 February.

The company did not immediately respond to a request for comment.

Prashanth Shivadass, partner, Shivadass & Shivadass Law Chambers said NCLT’s interim order seems to be a consensus order as a matter of status quo. “However, there are several valid points that were raised by Byju’s including knowledge of rights issue and no objections raised by the petitioners, despite their presence at the same meeting which ratified the rights issue etc.”

Byju’s desperately needs the money from the rights issue, which it said has been fully subscribed, to tide over its liquidity crisis, oversee current liabilities, and repay some of its vendors and debtors.

Mint reported on Tuesday that top investors in Think and Learn Pvt. Ltd, the parent company of Byju’s, which have moved the court to stay the rights issue, are likely to skip participating in the issue.

Byju’s, which was once valued at $22 billion, has proposed to raise $200 million through a rights issue at a nominal valuation of $25 million. The non-participation of some investors would result in their holdings in the company getting diluted to near zero.