Byju’s investor consortium moves NCLT against rights issue

A consortium of four investors in Byju’s has moved the National Company Law Tribunal against the troubled edtech firm’s rights issue citing suppression of investor rights and mismanagement of the company, a person with knowledge of the development told Mint. 

Prosus, General Atlantic, Sofina, Peak XV Partners have filed the petition before the Bengaluru bench of the tribunal, with support from Tiger Global and Owl Ventures, this person said, declining to be identified.

Earlier this month, Byju’s launched a rights issue at a pre-money valuation of $20 million, which stands to dilute the shareholding of non-participating investors by 99%. On Wednesday, Byju’s said investors had fully subscribed to the rights issue by its parent company Think & Learn Pvt. Ltd.

This is the first time investors have legally moved against the rights issue. 

So far, they have sought to force founder and chief executive Byju Raveendran off the company’s board and take control. On Friday, investors ran an extraordinary general meeting to reconstitute the board. The Byju’s founder group did not attend the meeting.

“Investors have sought relief on declaring the rights issue as void and declaring the founders and the management as unfit to run the company,” the person cited above said, adding that the case was filed on Thursday. 

On the rights issue, the investor consortium has argued that the management has not shared relevant financial information with the investor group, pointing to what they said was the “oppressive nature of the rights offer” and the “oppressive opacity and wilful default in sharing information with stakeholders”.

The investor consortium has also sought a direction to the company to not take any “corporate actions that will prejudice the rights of the investors”, and to conduct a forensic audit of the company.  

A spokesperson for Byju’s said the company has not received a notice on the NCLT petition.

“The company has not received any formal intimation of any such petition being filed in the NCLT… Indian regulations stipulate due process for conducting an EGM, intimation of petitions being filed in NCLT, etc. But certain shareholders prefer to manufacture a media spectacle as opposed to following due process,” the spokesperson said.  

“If such a petition has been filed, the company shall respond to the same as per applicable law and due process.”

The investors have cited several instances of financial mismanagement to support their petition. These include mismanagement that has resulted in Byju’s parent company, Think & Learn Pvt. Ltd, losing control of Aakash Education Services, the test-prep company it acquired in 2021 for about $1 billion. 

Think & Learn currently owns only about 27% for Aakash Education Services.

Investors have also claimed that Byju’s undertook several “unauthorised corporate action”, including the acquisition of Northwest Education Pte by Byju’s subsidiary Great Learning.

The investor consortium and Byju’s have been at the courts for several months now. 

Earlier this week, Byju’s said the Karnataka High Court had ruled that decisions taken at the EGM shall not come into effect till the case filed by Byju’s questioning the validity of the meeting was heard.