An appeal by the troubled EdTech start-up company BYJU’S seeking permission for an equity raise by Aakash Educational Services has been rejected by the National Company Law Appellate Tribunal (NCLAT). Aakash was acquired by BYJU’S in April 2021.
This rejection upholds an older order by the NCLT (National Company Law Tribunal) that directed the maintenance of the shareholding structure of Aakash as it currently exists. This put a pause on new equity transactions by Aakash, Business Today reports.
Both BYJU’S and Aakash deemed the appeal crucial and argued that the infusion of equity was important for the continued growth and survival of both companies.
BYJU’S has intensified its legal battle with American company Blackstone, which owns 6.8 per cent of Aakash. The equity raise has been opposed by Blackstone, which argued that doing so would undermine the rights of minority shareholders.
Despite BYJU’S and Aakash's arguments, the NCLAT's decision means that any possible equity transactions will be halted until further legal developments. This decision is a huge blow for BYJU'S, which has been looking into various ways to raise additional funds.
Meanwhile, Riju Ravindran, BYJU’S Co-founder, has petitioned the NCLT to remove GLAS Trust as a financial creditor during Think and Learn's (BYJU’S parent company) current insolvency proceedings.
Ravindran claims that GLAS Trust, an American corporation, only has permission to represent 17.38 per cent of the consortium of term loan providers' voting rights, and requests that the NCLT direct it to "prove its authority to represent the creditors before it."
Ravindran's petition further claims that GLAS Trust "fraudulently represented" itself as a financial creditor and secured various orders from the NCLT based on this misrepresentation. The petition claims that GLAS can only act on behalf of lenders if it is allowed by those who own more than 50 per cent of the term loan. The matter has been listed for hearing before the NCLT's Bengaluru bench.
This legal action by Riju Ravindran comes as BYJU’S faces financial commitments of $1.2 billion to its US-based creditor, represented by GLAS. These legal actions, as well as the broader issues in the EdTech sector, have exposed the company's financial struggles, making acquiring new investors increasingly important for sustainability and expansion.
