In a significant legal development, the National Company Law Appellate Tribunal (NCLAT) has dismissed the appeal by Byju’s, the prominent edtech firm, seeking permission for an equity fund raise by its subsidiary, Aakash Educational Services. This decision upholds an earlier order by the National Company Law Tribunal (NCLT) to maintain the current shareholding structure of Aakash, effectively putting a hold on any new equity transactions by the subsidiary. The appeal was crucial for Byju’s and Aakash, as they argued that the equity infusion was essential for their continued growth and survival.
The legal battle has been intensifying with Blackstone, which holds a 6.8% stake in Aakash, opposing the proposed equity raise, arguing it would undermine the rights of minority shareholders. Despite Byju’s and Aakash’s arguments, the NCLAT’s decision means that any potential equity transactions will remain frozen pending further legal developments. This decision marks a significant setback for Byju’s, which has been exploring various avenues to secure additional funding.
In a related matter, Byju’s co-founder, Riju Ravindran, has moved the National Company Law Tribunal (NCLT) seeking the removal of GLAS Trust as a financial creditor during the ongoing insolvency proceedings of Think and Learn. Ravindran argues that GLAS Trust, a US-based firm, only has authority to represent 17.38% of the voting rights of the consortium of term loan providers, asking the NCLT to direct it to “prove its authority to represent the creditors before it.”
Ravindran’s petition further alleges that GLAS Trust has “fraudulently represented” itself as a financial creditor and obtained several orders from the NCLT based on this misrepresentation. The petition contends that GLAS can only act on behalf of lenders if authorised by those holding more than 50% of the term loan. The matter is scheduled for a hearing before the Bengaluru bench of the NCLT.
Ravindran has also urged the NCLT to “stay CIRP of Think and Learn” as an interim measure until GLAS can prove its authority. He further accused the American firm of orchestrating a conspiracy involving Ernst & Young and successive Resolution Professionals to manipulate the Corporate Insolvency Resolution Process (CIRP) and maintain its control over it.
This legal move by Riju Ravindran comes as Byju’s faces financial obligations amounting to $1.2 billion to its US-based creditor, represented by GLAS. The company’s financial struggles have been highlighted by these legal proceedings and the broader challenges within the edtech sector, where securing new investments has become increasingly critical for sustainability and growth.
The current legal challenges underscore the complex financial landscape that Byju’s navigates as it attempts to stabilise its operations and ensure long-term viability. The outcome of these proceedings could have significant implications for the company’s financial standing and its ability to execute its strategic goals, particularly in light of its ongoing financial commitments.
Byju’s ongoing legal disputes and financial challenges reflect broader trends in the edtech industry, where companies are seeking to optimise their business models amid tightening financial conditions. The resolution of these legal and financial matters will be pivotal for Byju’s as it continues to chart its course in the competitive edtech market.
