 "Byju")
Edtech major Byju’s is grappling with another setback as the Bengaluru bench of the National Company Law Tribunal (NCLT) on 23 April deferred to 6 June the hearing of the “oppression and mismanagement plea” filed against the company by investors. The firm was hoping that the tribunal would allow it to use the rights issue money which would help the cash-strapped company run its daily operations and pay salaries to its 15,000 employees, according to sources. The total salary burn for the company ranges between Rs 40 and 50 crore.
Byju’s and its investors are fighting at the National Company Law Tribunal (NCLT) over the company’s rights issue of $200 million in a petition alleging oppression and mismanagement. The 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. Investors fear the rights issue would wipe out the value of their investment. Last month, NCLT Bengaluru refused to stay the extraordinary general meeting (EGM). Byju’s held its EGM to increase authorised share capital.
The NCLT, in its order on 27 February, instructed the edtech firm to place funds obtained from the rights issue in an escrow account. However, these funds cannot be withdrawn until the resolution of the matter related to the rights issue, according to sources. This action is part of the oppression and mismanagement petition filed against Byju’s by four of the company’s investors.
“Byju’s was hoping that NCLT would allow it to use the rights issue money to pay salaries to its employees. However, the tribunal adjourned the case for further hearing on 6 June,” said a person familiar with the matter. “This means Byju’s may again defer paying salaries to its employees for April as well and also further face a cash crunch to run daily operations.”
The person said that the Karnataka High Court is closed for summer holidays from 27 April to 26 May.
During the NCLT hearing on Tuesday, a group of investors in Byju’s accused the edtech firm of using some of the funds raised during the recently concluded rights issue in violation of the NCLT order. They alleged that Byju's had not deposited the money it received from the rights issue before 27 February in the escrow account. Byju’s denied the charge.
In Tuesday’s NCLT hearing, Byju’s senior counsel, K G Raghavan, assured the judges that the company has fully complied with the court's order dated 27 February. The allegations made by the counsels of four foreign investors regarding violation of the court order were refuted by Raghavan.
He said that the founder had to take personal debt to honour employees' salaries which clearly shows that there has been no violation.
“The bench noted the petitioners' failure to substantiate their claims of non-compliance effectively,” said a person familiar with the matter. “Their inability to convince the court of any wrongdoing on Byju’s part was evident. The judges prudently questioned the rationale behind initiating contempt proceedings when no such petition had been formally listed for hearing,” said the matter.
Byju Raveendran, the founder and chief executive of Byju’s, has reportedly secured a private debt of about Rs 30 crore to pay March salaries of employees amid financial strains at the edtech company. While senior-level staff received partial payments, teachers and lower-ranking employees were paid in full for March. Earlier, the firm had paid part salaries for February and had delayed payments for March as well. Now, both February and March salaries have been partially settled.
Byju’s recently laid off about 500 employees, or over 3 per cent of its total 15,000-strong workforce, as part of a restructuring exercise. The struggling educational technology (edtech) giant faces a severe funding crunch, battles investors and lenders, and has experienced a markdown in its valuation, according to sources. The latest round of layoffs is part of the restructuring exercise started by the Bengaluru-based edtech last year to let go of about 4,500 employees.
Just over six months after taking over the role, Byju’s India CEO Arjun Mohan has quit from his position in the firm, which is now restructuring its business into three divisions with founder Byju Raveendran handling the firm’s day-to-day operations.
