Aakash Approves Raising Authorised Share Capital To Proceed With Rights Issue

After overcoming significant legal hurdles, edtech major Aakash shareholders have approved a plan to increase the company’s authorised share capital to accommodate the proposed INR 500 Cr rights issue. 

In its EGM today, the company’s board approved the resolution to increase the authorised share capital after receiving approval by the requisite majority of shareholders present and voting. The meeting was attended by all eleven shareholders of Aakash, including the BYJU’S resolution professional (RP), which owns 25.54% of Aakash.

During the meeting today, BYJU’S representative objected to the proposal and mentioned ongoing court cases before the NCLAT and the NCLT that challenge Aakash’s rights issue.

Aakash chairman Shailesh Vishnubhai Haribhakti said the increase in authorised share capital and the rights issue are crucial to keep Aakash running and protect the value of BYJU’s investment. 

He urged BYJU’s lenders’ committee of creditors (CoC) to take part in the issue, which is being offered at face value, calling it a sensible opportunity. Meanwhile, BYJU’S won’t be able to participate in the issue given that it is already under insolvency proceedings.

The EGM took place a day after the NCLAT dismissed BYJU’S plea to thwart the fund raise plans. As per a report by LiveLaw, the tribunal observed that the value of BYJU’S stake in Aakash cannot be preserved if the subsidiary is commercially “killed” while dismissing its plea. 

However, it must be noted that the rights issue could cut BYJU’S stake from around 25% to below 5%. BYJU’S had acquired a controlling stake in AESL in 2021 for nearly $950 Mn–$1 Bn.

Given the implication of the stake reduction, the edtech company as well as its creditors have flagged risks multiple times in the past year. Earlier this month, the NCLT in Bengaluru rejected BYJU’s request to pause the EGM, saying a rights issue cannot be considered unfair just because a shareholder cannot take part. 

Last year, BYJU’S Term B loan lenders had opposed the meeting, with counsel for the Glas Trust arguing that the consortium, which holds about 40% of AESL, considered the meeting a “clear act of oppression.”

Now that Aakash’s shareholders have approved the capital increase, the company is set to move forward with its rights issue despite the aforementioned objections. The decision marks another turning point in the ongoing struggle between the troubled edtech giant, its lenders, and its most valuable subsidiary.