 "Byju's")
The National Company Law Tribunal (NCLT) in its order passed on February 27 has directed ed-tech firm Byju's to keep funds received from the rights issue in an escrow account. This should be done till the disposal of the oppression and mismanagement petition filed against Byju’s by four of the company’s investors. Escrow refers to a third party that holds money or an asset on behalf of the other two parties in a transaction.
NCLT has also directed Byju's to consider the extension of the closure date of the rights issue. This should be done so that the rights of the petitioners with regard to the making of application for shares under their rights entitlement does not get prejudiced.
According to sources, the edtech firm plans to close the rights issue by February 28, by midnight, as planned. The firm has already received a 100 per cent commitment of $200 million from "several existing investors on a super pro-rata basis" for its ongoing rights issue, according to people familiar with the development. "Some of the dissenting investors sought a few days extension which the court asked Byju’s to consider," said a person.
Another source said, “As per the order, there is no stay on rights issue,” said a source close to Byju’s. “Rights issue is on and it will close today. NCLT has requested Byju’s to consider extending the rights issue.”
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“A period of two weeks is granted to the authorities for filing a reply from the date of receipt of a copy of the notice and two weeks thereafter for filing a response/rejoinder, if any, thereto from the date of receipt of a copy of the reply is granted. List the case for further hearing on 04.04.2024,” said NCLT in its order which was made available on February 28.
The order said that since the company has already given an undertaking that there will be no allotment of shares without increasing the authorised share capital, the funds received from the rights offer will be kept in a separate account and will not be used for any purposes.
“The funds received by the respondent company (Byju’s) in respect to the rights issue should be kept in a separate escrow account and it should not be withdrawn till the disposal of this matter,” said the order.
Byju's and its investors locked horns at the National Company Law Tribunal (NCLT) on February 27 over the company's rights issue of $200 million in a petition alleging oppression and mismanagement. The company law court asked the embattled ed-tech firm to submit a written response to the investors' plea within three days, and had reserved its order. The tribunal also issued notices to the Ministry of Corporate Affairs and the Registrar of Companies.
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.
The group of investors argued that they were being forced to participate and their shareholding would be reduced if they didn’t take part in the rights issue. The Byju Raveendran-led firm countered that the investors were “forum shopping” by approaching the NCLT and any order by the tribunal would "dilute the order of Karnataka High Court". Byju’s, which was once the most-valued Indian startup, argued that the investors were not considering the interest of 100 million students and the 12,000 employees but only focused on their value maximisation.
US Lenders
Meanwhile, NCLT at Bengaluru on Wednesday also issued a notice to Byju's in a petition filed by the US-based non-bank loan agency Glas Trust Company LLC to admit the firm to the insolvency resolution process. The NCLT directed Byju's to file a response to the plea and listed the case for hearing in April 2024. It deals with defaulting on a $1.2 billion term loan B.
In January, US-based lenders to Byju’s have approached the NCLT Bench in Bengaluru to start corporate insolvency proceedings against the ed-tech company. The ad hoc group of lenders (the Ad Hoc Group), which lent $1.2 billion as term loans (Term Loans) to Byju’s, said GLAS Trust Company LLC (as administrative agent and collateral agent of the Term Loans) had filed a petition against Think & Learn (doing business as Byju’s) before the Bench.
