Aakash Puts BYJU’S INR 25 Cr Share Allotment On Hold

Aakash Rights Issue: BYJU’S Parent’s INR 25 Cr Share Allotment Put On Hold

SUMMARY

Aakash’s board put the share allotment on hold citing non-compliance with FEMA rules, the Companies Act, or the ECB guidelines

The board approved the allotment of shares worth INR 58 Cr and INR 16 Cr to Manipal Group and Beeaar Investco Pte Ltd, respectively, under its INR 100 Cr rights issue

BYJU’S parent Think & Learn rights issue subscription came after a contentious period, with its resolution professional contesting Aakash’s capital raise before NCLT, NCLAT, and SC

Aakash Educational Services has put the share allotment of INR 25 Cr to Think & Learn Pvt Ltd (TLPL), the parent of bankrupt edtech unicorn BYJU’S, as part of its INR 100 Cr rights issue on hold, citing non-compliance with Foreign Exchange Management Act (FEMA) rules, the Companies Act, or the External Commercial Borrowings (ECB) guidelines.

Aakash, in a statement, said that its board approved the allotment of shares worth INR 58 Cr and INR 16 Cr to Manipal Group and Beeaar Investco Pte Ltd, respectively. The two investors participated in the rights issue in proportion to their shareholding in Aakash, which is 58.8% stake of Manipal and 16% of Beeaar Investco.

However, TLPL’s INR 25 Cr subscription was suspended pending regulatory review.

TLPL’s rights issue subscription came after a contentious period, with the resolution professional of BYJU’S parent contesting Aakash’s capital raise before the NCLT, the NCLAT, and the Supreme Court. TLPL later deposited INR 25 Cr to subscribe to the shares under the rights issue.

However, Riju Ravindran, a former promoter of TPLP, alleged in an application filed in NCLT Bengaluru that TLPL raised the INR 25 Cr for the rights issue by issuing issuing INR 100 Cr of debentures in a structure that violated FEMA, the ECB guidelines, and the FEMA rules.

While TLPL’s resolution professional provided documentation and legal opinion attesting compliance, Aakash sought independent validation from a retired Supreme Court justice and an RBI general manager, who “indicated” that the debenture issuance and the inflow of funds was in violation of the norms, the coaching centre chain said.

Consequently, Aakash’s board decided to defer the allotment of shares to TLPL until the

pending issues are adjudicated by NCLT, Bengaluru. The INR 25 Cr deposited by TLPL will be kept in a separate interest-bearing account pending final decision.

“It is clear the money received by TLPL is in the nature of a loan/ debenture in the framework of external commercial borrowing and cannot be used for the purpose of acquisition of equity i.e., shares in Aakash. If any inquiry was undertaken by a regulatory authority, Aakash could be accused of having allowed a rights issue, thereby enabling an ECB to be used for the purposes of investment into equity,” said Aakash’s legal head Sanjay Garg.

In October, Aakash’s board approved raising INR 100 Cr via the rights issue to keep the business afloat after a rough ride in the past few years. Now, Aakash is also mulling another rights issue of INR 140 Cr.

Aakash was acquired by BYJU’S for $1 Bn in 2021. However, the troubles of debt-laden BYJU’S resulted in changes in the ownership of Aakash, with Manipal Group now holding the largest stake in it. Meanwhile, BYJU’S is currently undergoing insolvency proceedings, while its cofounders are involved in multiple legal battles in India and the US.