Disclosure in US court counters narrative by four investors, says Byju's

US-based Camshaft, in its latest submission, has disclosed to a Delaware Court that $533 million was transferred from Byju’s Alpha to another 100 per cent Think & Learn-owned subsidiary, Inspilearn LLC (a Delaware firm).

Byju’s said this counters the fake narrative by four investors at the National Company Law Tribunal (NCLT) that the amount was siphoned off.

It added that as indicated previously, the funds continue to remain in a subsidiary of the company’s parent firm Think and Learn.

Camshaft, a wealth manager that had managed the funds, disclosed to the court earlier this week that the money was transferred to a 100 per cent subsidiary of Byju’s.

It said this is consistent with its position that the group entities remained the beneficiary holders of the money, which the lenders have sought to gain information on, citing technical defaults.

Byju’s also clarified that no limited partners in the Camshaft Capital Fund are related or are any subsidiary of Think & Learn.

The company said, “Byju’s, through a US-based single-purpose entity, Byju’s Alpha, raised $1.2 billion in 2021 to finance international operations.” 

Byju's and its investors locked horns at the NCLT on February 27 over the company's rights issue of $200 million in a petition alleging oppression and mismanagement.

The group of four investors — Prosus, General Atlantic, Sofina, and Peak XV (formerly Sequoia) — had sought a stay on the rights issue at less than 99 per cent enterprise valuation compared to Byju's peak valuation of $22 billion.

They have the support of other shareholders, including Tiger Global and Owl Ventures, according to sources.

Investors contended that they have no visibility on how the rights issue money will be used.

This is given that there are so many investigations against the company and the founder from the Enforcement Directorate (ED) and the Ministry of Corporate Affairs (MCA). This is amid a lookout notice, and allegations of syphoning of funds, including the $533 million.

They alleged that there was diversion of funds of over $500 million by Byju’s to a hedge fund in the US. The address of the hedge fund was a pancake shop.

NCLT, in its order passed on February 27, had directed Byju's to keep funds received from the rights issue in an escrow account.

As reported earlier, Byju’s may appeal to NCLT to allow it to use the funds. The edtech firm is unable to pay salaries to employees as the funds have been locked in a "separate account" due to the ongoing dispute with the investors.

Regarding the dispute with US lenders, Byju’s also said the credit agreement with the lenders does not prohibit or restrict the usage, movement or investment of funds disbursed.

Further, there is no requirement to maintain cash as collateral for the lenders under the credit agreement. However, the regulations do not allow use of term loan B (TLB) funds in India. 

“Some predatory bond traders procured the filing of proceedings before the US Bankruptcy Court as part of their campaign to unlawfully accelerate the credit agreement,” said Byju’s.

“Additionally, unfounded allegations were made by four Think and Learn shareholders before the NCLT last week. They pursued their misguided attempt to unilaterally replace the current board and chief executive officer (CEO), Byju Raveendran,” said the company.