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Byju's EGM Gets Green Light: NCLT Denies Investor Plea for Stay on Rights Issue

The National Company Law Tribunal (NCLT) has rejected a request from Byju's investors to block the company's upcoming EGM and stall a $200 million rights issue. This decision comes amidst Byju's ongoing financial struggles and investor discontent.

Byju's EGM Gets Green Light: NCLT Denies Investor Plea for Stay on Rights Issue

Byju's, the Indian education technology (EdTech) giant, faces another hurdle in its ongoing battle with investors. The National Company Law Tribunal (NCLT) in Bengaluru has refused to grant a stay on the company's extraordinary general meeting (EGM) scheduled for March 29, 2024. This EGM is crucial for Byju's as it aims to raise $200 million through a rights issue to address its financial woes.

 

However, this decision is not an outright win for Byju's. The tribunal, acknowledging investor concerns, has directed Byju's to share all relevant financial information related to the rights issue. This includes providing details that investors have previously requested. The next hearing on the matter is scheduled for April 4, 2024.

 

Investors Challenge Byju's Rights Issue

This development comes after Byju's investors, led by Prosus, the South African internet giant, approached the NCLT seeking a stay on the EGM and the rights issue. The investors have raised concerns about Byju's corporate governance and financial health. They have accused the company's management of mismanagement and a lack of transparency.

 

Byju's, once India's hottest startup with a valuation of $22 billion in 2022, has been grappling with a series of setbacks since 2023. These include:

  • Auditor Resignation: Byju's auditor resigned, raising questions about the company's financial reporting practices.
  • Lender Bankruptcy Proceedings: Lenders initiated bankruptcy proceedings against a Byju's holding company, reflecting concerns about the company's ability to repay its debts.
  • US Lawsuit: Byju's faced a lawsuit in the US over a disputed loan, further highlighting its financial difficulties.
  • Investor Ouster Attempt: Earlier in 2024, Byju's investors voted to remove CEO Byju Raveendran due to governance and financial concerns.

 

Byju's hopes to use the upcoming EGM and rights issue to raise much-needed capital to stabilize its finances. The company has assured investors that the funds raised will be placed in a separate escrow account and will not be used until the NCLT reaches a final verdict. The NCLT's decision is a mixed bag for Byju's. While the EGM can proceed, Byju's must address investor concerns by providing greater financial transparency. The upcoming NCLT hearing on April 4 will be crucial in determining the fate of the rights issue and Byju's future.

Byju's saga serves as a cautionary tale for the EdTech industry, which has witnessed rapid growth in recent years. It highlights the importance of strong corporate governance, financial transparency, and building trust with investors for long-term success.


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