The fear of struggling edtech firm Byju’s once again falling into cash crunch has deepened. This could have a negative impact on its daily operations and lead to problems in paying salaries to its 15,000 employees. The National Company Law Tribunal (NCLT), in its order dated February 27, directed Byju’s to keep the money it received from the rights issue in an escrow account.
Sources say that this money will not be withdrawn until the matter is resolved. This is part of a litigation related to harassment and mismanagement filed against Byju’s by four investors of the company.
A person aware of the matter said, ‘The money raised through the rights issue could have helped the company continue operations for the next few months. But now this money will not be withdrawn until the matter is resolved.
He said that Byju’s can request NCLT to seek permission to use this amount. The NCLT had directed it that the proceeds from the rights issue should be kept in a separate escrow account and should not be withdrawn until the matter is resolved.
According to sources, the edtech firm has already received 100 per cent commitments of $200 million from multiple existing investors on a super pro-rata basis for its rights issue. This rights issue closed on 28 February. Byju’s now needs to convene an EGM within 30 days and secure 50 per cent votes in respect of the authorized share capital.
On February 27, Byjus and his investors had filed a petition in NCLT regarding the company’s $200 million rights issue, alleging mismanagement. NCLT asked Byju’s to respond to the investors’ petition in three days and reserved its order. The tribunal also issued notices to the Ministry of Company Affairs and the Registrar of Companies.
Analysts say the rights issue is an invitation for existing shareholders to buy additional new shares in the firm. This scheme is mainly used by cash-strapped companies to raise funds at a time when they really need it. In this type of rights issue, existing shareholders are given securities called rights in which they can buy new shares at a discount.
Earlier this month, the edtech firm’s founder and CEO Baiju Raveendran had said that the company had paid all the outstanding salaries for January to employees in the last two days. This information was also given to the employees in another letter sent on 4th February.
First Published – February 29, 2024 | 10:43 PM IST
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