Investors Accuse Byju's Of Siphoning $533 Million, Seek Stay on $200 Million Rights Issue

The NCLT has summoned Byju's to present a written response to these allegations within three days and has reserved its order on the matter

Investors of the renowned edtech giant Byju's have levelled serious allegations against the company, alleging an illicit transfer of a staggering $533 million to an obscure hedge fund in the US. The investors, in a plea before the Bengaluru-bench of the National Company Law Tribunal (NCLT) on Tuesday, sought a halt on Byju's planned $200 million rights issue, branding it as illegal and contrary to law.

The NCLT has summoned Byju's to present a written response to these allegations within three days and has reserved its order on the matter. The contentious rights issue, intended to infuse funds into the start-up, faces imminent closure on Wednesday. However, both parties have raised concerns over its legality and execution, citing technicalities.

While Byju's refrained from commenting on the accusations raised by four of its shareholders during the NCLT proceedings, sources close to the company indicated that in the absence of a stay order by the NCLT, the rights issue would proceed as scheduled.

The investors argue that the rights issue contravenes the Companies Act of 2013, as it was initiated without the necessary procedures, including an increase in the authorized share capital and approval through an extraordinary general meeting of shareholders.

Furthermore, the investors allege that Byju's conducted the rights issue offer without adequate notice and dispute the valuation of the company at $200 million, which starkly contrasts with its previous valuation of $22 billion.

In a bid to thwart the rights issue, investors contend that their concerns extend beyond financial matters, emphasising the potential irreversible consequences of diverted funds remaining offshore. They highlight their primary focus on safeguarding the interests of the company's stakeholders, including its vast student base and workforce.

However, Byju's legal representatives argue that the investors are engaging in forum shopping and point to a prior high court order restraining them from implementing any resolutions passed during a recent extraordinary general meeting.

Amid escalating tensions, the future of Byju's remains uncertain, with both sides entrenched in a legal battle that could profoundly impact the company's trajectory and the interests of its stakeholders.