NCLT Asks Byju's To Extend Closing Date Of $200 Million Rights Issue

While the next hearing is scheduled for April 4, sources close to Byju's management indicated their reluctance to extend the deadline for the rights issue

The National Company Law Tribunal (NCLT), Bengaluru Bench, has intervened in the ongoing saga surrounding the embattled edtech giant Byju's, asking the company to consider extending the closing date of its $200 million rights issue. The NCLT's interim order, dated February 27, stipulated that the funds garnered through the rights issue must be held in a separate escrow account until further notice, effectively halting any withdrawals.

"The respondent company is to consider the extension of the closure date of the rights issue so that the rights of the petitioners with regard to the making of application for shares under their rights entitlement does not get prejudiced," said the NCLT order.

While the next hearing is scheduled for April 4, sources close to Byju's management indicated their reluctance to extend the deadline for the rights issue. Despite estranged investors highlighting technicalities hindering the issue's closure on Wednesday, Byju's management maintained that there would be no extension.

However, a group of investors, holding a significant stake in Byju's and expressing dissatisfaction with the management's performance, argued that the rights issue couldn't proceed without shareholders' authorisation for the increase in share capital. It remains uncertain whether these investors participated in the rights issue.

The controversy surrounding Byju's escalated earlier when investors alleged that the company had transferred $533 million to an obscure hedge fund in the US. This led to a legal challenge seeking to halt the $200 million rights issue, labeling it illegal and against the law.

Notably, Byju's shareholders had previously voted to remove founder-CEO Raveendran and his family from the board, citing mismanagement and failures. However, the company disputed the validity of the vote, arguing that it was conducted in the absence of the founders.

Prosus, one of the major investors behind the push for management changes, reiterated its stance, highlighting the need to resolve governance, financial mismanagement, and compliance issues within Byju's.

Once hailed as India's leading edtech start-up, Byju's has faced a series of setbacks in recent times, including financial strain due to the return of students to physical classrooms post-pandemic, the acquisition of Aakash, auditor resignations, bankruptcy proceedings by lenders against a holding company, and a lawsuit in the US disputing loan terms and repayment.