NCLT reserves order on plea against rights issue by Byju’s

Mumbai: The National Company Law Tribunal on Tuesday reserved its judgment on the plea filed by a few of Byju’s investors seeking the court’s intervention in declaring the firm’s rights issue as void and the founders as unfit to run the company, citing oppression and mismanagement. While this allows Byju’s to go ahead with the rights issue, which closes on Feb 28, the company — that is reeling under a cash crunch — may not be able to immediately use the proceeds raised through the issue. The NCLT, investor sources said, has observed that Byju’s board cannot increase authorised share capital on its own for the rights issue. “The court directed that they (Byju’s) cannot complete the rights issue until they call for an EGM to increase authorised capital and take shareholder approval before proceeding for rights issue. In response, Byju’s gave an undertaking to the court that they will not use proceeds of the rights issue until the authorisation has been secured. The company is banking on its rights issue to raise capital and meet current liabilities. It aims to secure $200 million through the issue at a valuation of $225-230 million — a 99% drop from its peak valuation of $22 billion. A few of the firm’s disgruntled investors including Prosus, Peak XV Partners and General Atlantic are yet to participate in the rights issue. If they don’t participate, their shareholding will get diluted. In court, lawyers representing the investors are learnt to have argued that they have no visibility on how the funds raised through the rights issue will be used given there are so many ongoing investigations against the company. “$533 million (the money raised as part of term loan which Byju’s Alpha allegedly transferred in an obscure hedge fund) has been siphoned off. He (Byju Raveendran) wants us to invest more money. How will we be protected? We have requested the company to provide information covering a broad range of matters. There are 13 letters we have written between the end of 2022 and end of 2023 asking for information,” the investors’ lawyers argue.