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Business News/ Companies / Byju’s likely to go ahead with rights issue after NCLT defers verdict

Byju’s likely to go ahead with rights issue after NCLT defers verdict

The National Company Law Tribunal has sought written submissions in three days from Byju’s and its investors, who had sought a stay against the company’s $200-million rights issue

Byju Raveendran, co-founder and chief executive officer of Byju's. (Bloomberg)Premium
Byju Raveendran, co-founder and chief executive officer of Byju's. (Bloomberg)

MUMBAI, BENGALURU : The National Company Law Tribunal has deferred its verdict on a case filed by investors against Byju’s to next week, which, in effect, paves the way for the online tutor to go ahead with its $200-million rights issue.

A Bengaluru bench of the NCLT led by Justice K. Biswal and Justice Manoj Kumar Dubey on Tuesday asked both Think & Learn Pvt. Ltd, the parent company of Byju’s, and its investors to file written submissions within three days.

With the NCLT deferring its order to next week, Byju’s will proceed with its rights issue as planned and close it on Wednesday, said a person familiar with the company’s thinking, declining to be identified.

Large investors who had moved the tribunal are unlikely to participate in the rights issue, said another person familiar with their plans.

Byju's didn’t immediately reply to queries on its plans for the rights issue.

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. 

Also read: Mint Explainer: The mountain of legal cases that could bury Byju’s

Since NCLT has not passed any stay or restraint order Byju’s can proceed with its rights issue, said Ashish Pyasi, partner at Aendri Legal.

“However, if the acts are done with an intention to defeat the purpose of the application itself then the tribunal or court which is seized of the matter may consider it as an act of interference with the administration of justice," he said.

The tribunal also has the powers to reverse the acts, Pyasi added.

The bone of contention has been that Byju’s has valued itself at $20 million for the rights issue, a steep discount to its peak valuation of about $22 billion. In effect, investors’ shareholding in Byju’s would be diluted by about 99% if they do not participate in the rights issue, and if they do, the value of their shareholdings would be diluted.

Investors, including Prosus NV, Peak XV Partners, General Atlantic, and Sofina SA, had approached the NCLT seeking an immediate stay on the rights issue, and also requesting a direction to Byju’s to make appropriate disclosures of the company and its subsidiaries.

“We do not know what is happening in the company to protect our interests," Aryama Sundaram, the senior counsel representing the investors, told the Bengaluru bench of the tribunal at the hearing on Tuesday.

At the NCLT, the investors have also sought an injunction on Byju’s selling, alienating or disposing of assets belonging to the company or any of its subsidiaries, Sundaram said.

Besides filing an oppression and mismanagement case against Byju’s, the investors also sought an overhaul of the company’s board, including the removal of founder and CEO Byju Raveendran and his wife Divya Gokulnath, the senior counsel said.

He, however, stated that the overhaul can be done after a detailed hearing in the matter and that there was no urgency in that application.

At an extraordinary general meeting on Friday, investors unanimously voted for similar resolutions—“reconstitution of the board of directors so that it is no longer controlled by the founders" as well as “a change in leadership of the company", according to Prosus, the second-largest shareholder in Think & Learn with a 9% stake. 

Byju’s has dismissed the validity of the EGM.

The counsel representing Byju’s at the NCLT said the paramount question was to protect the interests of the company. 

Byju’s asserted that its investors were informed about the rights issue on 27 January, and that in addition to the board members, advisory members Rajnish Kumar and Mohandas Pai had attended the board meeting regarding the rights issue. Investor observers were also present, the company said.

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Published: 27 Feb 2024, 06:18 PM IST
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