MUMBAI: Troubled edtech startup Byju's has filed a plea in the Karnataka High Court challenging the National Company Law Tribunal's order restraining it from going ahead with the second tranche of its $200 million rights issue. Byju's declined to comment.
In a fresh order issued earlier this month, the NCLT bench in Bengaluru directed the startup not to go ahead with the second tranche and also restrained it from using any funds raised since the issue on May 13. The NCLT also directed the company to maintain status quo with respect to existing shareholders and their shares.
The second tranche is part of the issue that the cash-strapped company was hoping to use to raise $200 million. Since some investors did not participate in the first round, the issue was not fully subscribed and was therefore split into two tranches. In the second round, the unsubscribed portion was made available to existing investors so that they could invest on a super pro rata basis (a provision that allows investors to acquire a larger share of the company).
A group of Byju's investors reiterated in their petition that the company is in “deep distress” due to diversion of funds by the startup's management and should therefore not be allowed to raise further money.
Earlier this year, Byju's had launched its $200 million rights issue at a valuation of $225-230 million, a 99% decline from its peak valuation of $22 billion. A section of investors, including Prosus, Peak XV Partners, Sofina and General Atlantic, opposed the rights issue from the beginning.
In an interim order issued in late February, the NCLT had directed Byju's to keep the funds raised in the first tranche of its rights issue in a separate escrow account while restraining the company from withdrawing those funds pending the outcome of the lawsuit filed by its investors.
In a fresh order issued earlier this month, the NCLT bench in Bengaluru directed the startup not to go ahead with the second tranche and also restrained it from using any funds raised since the issue on May 13. The NCLT also directed the company to maintain status quo with respect to existing shareholders and their shares.
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The second tranche is part of the issue that the cash-strapped company was hoping to use to raise $200 million. Since some investors did not participate in the first round, the issue was not fully subscribed and was therefore split into two tranches. In the second round, the unsubscribed portion was made available to existing investors so that they could invest on a super pro rata basis (a provision that allows investors to acquire a larger share of the company).
A group of Byju's investors reiterated in their petition that the company is in “deep distress” due to diversion of funds by the startup's management and should therefore not be allowed to raise further money.
Earlier this year, Byju's had launched its $200 million rights issue at a valuation of $225-230 million, a 99% decline from its peak valuation of $22 billion. A section of investors, including Prosus, Peak XV Partners, Sofina and General Atlantic, opposed the rights issue from the beginning.
In an interim order issued in late February, the NCLT had directed Byju's to keep the funds raised in the first tranche of its rights issue in a separate escrow account while restraining the company from withdrawing those funds pending the outcome of the lawsuit filed by its investors.
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