The Karnataka High Court on Tuesday set aside a National Company Law Tribunal ruling of 12 June restraining Byju’s from using the funds raised from its second rights issue, but the money is still out of immediate reach for the troubled edtech company.
A high court bench led by Justice S.R. Krishna Kumar has asked NCLT to consider the matter afresh.
Byju’s launched a second rights issue on 13 May after it failed to raise the capital it needed in a $200-million rights issue earlier this year. The latest rights issue was scheduled to conclude on 13 June, but NCLT stepped in a day earlier, halting the fundraise and directing Byju’s to park the funds collected so far in a separate account.
Think and Learn Pvt. Ltd, the parent firm of Byju’s, subsequently approached the Karnataka High Court on 18 June seeking the quashing of the NCLT order.
The first issue
Byju’s has not been able to access any capital so far because of ongoing litigation between the company’s management and its investors.
Four key investors in Byju’s—Prosus Ventures, Peak XV Partners Investments IV & V, Sofina SA, and General Atlantic Singapore TL Pte. Ltd—have accused the company of oppression and mismanagement.
These investors have moved court seeking the ouster of the company’s founder group, including chief executive Byju Raveendran, following which the court stayed the edtech firm from accessing any capital that it had raised from its rights issue.
They were also peeved with the firm’s $200-million rights issue at a throwaway valuation of $225 million that threatened to wipe out their stakes unless they participated in it. Byju’s was once India’s most-valued startup, with an estimated worth of $22 billion.
Last month, Prosus said it had written off its entire $530-million investment in Byju’s because of a “significant decrease in value for equity investors”, adding that it had recognised a loss of $493 million on the investment in financial year 2023-24.
Lawyers for the investors have argued that Byju’s had not secured a board resolution for its second rights issue.
Byju’s had said in a media statement on 15 April that it had secured 55% votes to expand its authorised share capital and to approve the earlier rights issue.
NCLT, in an order related to the first rights issue, had on 27 February directed that there would be no allotment of shares without increasing Byju’s authorized share capital, and that the funds received had to be kept in a separate escrow account and not withdrawn till the disposal of the matter.