On February 27, Byju's and its investors clashed at the National Company Law Tribunal (NCLT) over the company's $200 million rights issue, with the petition alleging tyranny and mismanagement. The company law court requested that the struggling edtech firm respond to the investors' petition in writing within three days and reserved its decision. The Tribunal also sent notices to the Ministry of Corporate Affairs and the Registrar of Companies. In the absence of an interim ruling, sources at Byju's stated the business would proceed with the rights offering, which is slated to close on February 28.
The group of four investors — Prosus, General Atlantic, Sofina, and Peak XV (formerly Sequoia) — had requested a stay on the rights issue at a valuation of less than 99 percent of Byju's peak of $22 billion. According to sources, they are supported by additional stockholders such as Tiger Global and Owl Ventures.
The group of investors claimed that they were obliged to participate and that if they did not participate in the rights offering, their shareholding would be decreased. The Byju Raveendran-led firm argued that the investors were "forum shopping" by petitioning the NCLT, and that any ruling by the tribunal would "dilute the order of the Karnataka High Court".
"The NCLT did not intend to issue any orders today (February 27). That means the rights issue may go on as scheduled and will be completed tomorrow," a source said.
Earlier in the day, investors protested that Byju's rights issuance process looked to violate legislation. The investors stated that the rights issue could not proceed because an increase in authorized share capital was required by law. They said they owned more than 25% of the company but were given no information, and there were ongoing inquiries against the corporation.
They further stated that the reported board meeting on January 27, at which the present board claimed to have passed the proposal for a rights issue, was invalid and that no such resolution was passed.
"Note that this meeting was scheduled as an investor update call and the investors had disputed such rights offer to be rolled out without the company giving them enough information on the financials, etc," said a source familiar with the matter.
The investors further claimed that the low valuation of $20 million for the rights issuance was not justified or supported by any evidence or data.
Byju's, which was previously the most valuable Indian startup, said that the investors did not consider the interests of the 100 million students and 12,000 staff, but rather concentrated solely on their own valuation. Investors also claimed that they have no idea how the rights issue money will be used because there are so many ongoing investigations against the company and its founder by the Enforcement Directorate (ED), Ministry of Corporate Affairs (MCA), lookout notice, and allegations of siphoning funds, including $533 million. They said that Byju's diverted over $500 million to a hedge fund in the United States. The hedge fund's address was a pancake shop. The hedge fund's founder is a 23-year-old with no formal training.
