Byju's NCLT hearing: Investors allege over $500 mn diversion to hedge fund in US

In an ongoing hearing at the National Company Law Tribunal (NCLT) in Bengaluru, key investors in Byju’s have alleged that over $500 million has been diverted by the edtech company to a hedge fund in the US. The investors expressed concerns over the address of the hedge fund being a “pancake shop” and its founder being a “23-year-old without any training.”

Byju’s key investors — Prosus, General Atlantic, Sofina, and Peak XV — have taken the matter to the tribunal regarding the company’s $200 million rights issue. During the hearing, the investors raised apprehensions about the funds being transferred abroad and becoming irreversible, especially when the company’s founder is not residing in India.

The investors claimed that Byju’s process for its rights issue is “in breach of laws” and that the board of directors did not call a General Meeting of shareholders before the rights issue for voting. They expressed concerns about their stake in the company reducing significantly if they do not participate in the rights issue.

Byju’s countered the investors’ allegations by accusing them of “forum shopping” by approaching the NCLT. The company’s lawyer argued that any order passed by the tribunal would undermine the orders of Karnataka High Court. Byju’s highlighted the importance of considering the interests of students and employees over value maximization for investors.

According to Byju’s, it has been 21 months since their last capital raise, and they emphasized the significance of sustaining operations for the benefit of millions of students and thousands of employees. The dispute between Byju’s and its investors has shed light on the intricacies of corporate governance and financial management within the fast-growing edtech sector.