Investors in edtech giant Byju’s have raised serious allegations, claiming the diversion of $533 million into an obscure US hedge fund. The accusations come amid a $200 million rights issue by Byju’s, with investors seeking a stay on grounds of illegality and violation of laws. The National Company Law Tribunal (NCLT) is actively examining the case, and the rights issue’s fate remains uncertain.
About Byju’s and Rights Issue Controversy:
Byju’s, a prominent player in the edtech sector, is facing scrutiny as investors challenge the legality of a $200 million rights issue. The Bengaluru bench of the NCLT is currently assessing the case, with the rights issue scheduled to conclude soon. Investors argue that the issue is unlawful and contrary to regulations, insisting on a stay to prevent irreversible consequences.
Allegations of Fund Diversion and Legal Proceedings:
Investors contend that Byju’s diverted $533 million to Camshaft Capital Fund, raising concerns about the legitimacy of the transaction. The NCLT has asked Byju’s to provide a written response within three days, keeping the rights issue’s deadline in mind. The accusations include claims of the board meeting’s invalidity, insufficient notice for the rights issue, and disputing the company’s $200 million valuation.
Byju’s, while not commenting on the allegations during the NCLT proceedings, had previously stated that the funds were invested securely offshore. The company faces accusations of urging additional investments from shareholders while alleged fund diversions occurred. Legal representatives for Byju’s argue that investors are creating obstacles, and the Karnataka High Court’s order should be respected rather than seeking relief from the NCLT.
Conclusion:
The ongoing legal battle over the rights issue and the allegations of fund diversion have cast a shadow over Byju’s, a prominent player in the edtech sector. The NCLT’s reserved order adds uncertainty to the situation, impacting the future course of the $200 million rights issue. The outcome of this case could potentially influence the regulatory landscape for fundraising activities by major startups, reflecting the intersection of corporate governance, legal compliance, and investor protection in the Indian business ecosystem.
