Byju's NCLT Battle Edtech Giant's Rights Issue Sparks Investor Dispute

28 Feb, 2024

Byju's NCLT Battle Edtech Giant's Rights Issue Sparks Investor Dispute

Byju's and its investors engaged in a legal dispute at the National Company Law Tribunal (NCLT) on February 27 regarding the company's $200 million rights issue, amidst allegations of oppression and mismanagement. The NCLT directed Byju's to provide a written response to the investors' petition within three days and reserved its order, while also issuing notices to relevant authorities.

Despite the absence of an interim order, Byju's intended to proceed with the rights issue, slated to conclude on February 28. The group of investors, comprising Prosus, General Atlantic, Sofina, and Peak XV (formerly Sequoia), contested the valuation discrepancy, seeking a stay on the rights issue below 99% of Byju's peak valuation of $22 billion, with backing from shareholders such as Tiger Global and Owl Ventures.

The investors argued against coercion to participate in the rights issue, accusing Byju's of forum shopping and potential dilution of Karnataka High Court's order. The NCLT declined to issue an immediate order, allowing the rights issue to proceed as planned.

Earlier objections from investors centered on procedural breaches and lack of transparency, including insufficient information on financials and the absence of a valid board resolution. Moreover, investors contested the justification for the $20 million valuation of the rights issue, emphasizing the absence of supporting data.