Second Rights Issue: BYJU’S Moves Karnataka HC Against NCLT Order

Troubled edtech firm BYJU’S has moved the Karnataka High Court challenging the order of the National Company Law Tribunal (NCLT) restraining it from going ahead with the second tranche of its $200 Mn rights issue.

The plea is likely to come up for hearing today (June 24), ET reported.

On June 13, Inc42 reported that the NCLT directed BYJU’S to maintain the current status of existing shareholders and their shareholdings. 

This follows a previous order dated February 27, where the NCLT instructed BYJU’S not to issue shares without increasing its authorised share capital and to keep funds from a rights issue in a separate escrow account until the matter is resolved. 

The tribunal’s decision came after objections were raised regarding BYJU’S second rights issue, which began on May 13 and has been halted pending resolution of issues related to the first rights issue.

Following this, the tribunal restrained BYJU’S from going ahead with the second rights issue till the petition against the first rights issue is disposed of.

“The Respondents (BYJU’S) are further directed to keep the amounts collected so far since opening of the second rights issue in relation to this offer in a separate account which should not be utilised till the disposal of the main petition in CP No. 18/BB/2024. Further, status quo with regard to existing shareholders and their shareholding shall be maintained till the disposal of the main petition,” back then the tribunal said.

The development comes at a time when BYJU’S is embroiled in multiple legal cases in courts across India and the US. Disgruntled investors have accused the company of violating the NCLT’s February order.

The story traces its origins to February 2024, when reports surfaced that the edtech major was looking to undertake a rights issue at a 99% valuation cut. Subsequently, investors organised an extraordinary general meeting (EGM) in a bid to remove CEO Byju Ravendran and his family from leadership at the company.

Despite legal challenges, the EGM proceeded along with the rights issue, leading disgruntled investors to file a petition with the NCLT alleging oppression and mismanagement within the company. The investors, including Peak XV Partners, General Atlantic, Chan-Zuckerberg Initiative, and Prosus, claimed that BYJU’S was using funds from the $200 Mn rights issue against the Tribunal’s order to maintain shareholding status quo.

The investor plea also claimed that BYJU’S had not deposited the money it received from rights issue prior to February 27 in the escrow account. 

However, the company denied any wrongdoing. 

BYJU’S net loss surged 81% YoY to INR 8,245.2 Cr (close to $1 Bn) in FY22 even as operating revenues also rose over 120% to INR 5,014.6 Cr during the year under review, largely on the back of the coaching arm Aakash.

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