During the National Company Law Tribunal (NCLT) hearing, prominent investors of the embattled edtech giant Byju's raised concerns regarding the company's handling of its $200 million rights issue, alleging violations of laws in the process.
The investors contended that Byju's board of directors should have convened an Extraordinary General Meeting (EGM) of shareholders prior to initiating the rights issue, providing them with an opportunity to vote on the matter. They argued that the board's failure to do so implied a lack of confidence in garnering shareholder support.
Expressing apprehension about the potential consequences, the investors highlighted that their significant stake of 25.4 percent could drastically diminish to a mere 2.5 percent if they opted out of subscribing to the rights issue. They expressed uncertainty about the utilization of their funds should they choose to participate.
Furthermore, the investors voiced discontent over the lack of transparency, citing ongoing investigations and a dearth of information provided to them.
In response, Byju's defended its actions, accusing the investors of resorting to "forum shopping" by seeking intervention from the NCLT. The company's legal counsel argued that any order issued by the NCLT could undermine the authority of the Karnataka High Court.
Byju's emphasized the necessity of prioritizing the interests of its vast student user base and workforce comprising 12,000 employees over individual shareholder concerns. The company acknowledged the challenging operating environment it has faced, noting that tough decisions were imperative for its sustained growth.
Highlighting the prolonged duration since its last capital raise, Byju's underscored the urgency of securing additional funding amidst evolving market conditions.
Meanwhile, the government has expedited its examination of Byju's financial records, with the company having promptly responded to all inquiries from the Ministry of Corporate Affairs (MCA), in anticipation of a prompt resolution to the ongoing scrutiny.
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