Aakash Educational Services (AESL) has deferred the allotment of shares to Think & Learn (TLPL), the parent company of Byju‘s, as part of a Rs 100-crore rights issue, citing potential violations of foreign exchange and external borrowing norms, according to a statement.
As part of the rights issue, AESL allotted shares to Manipal Group and Beeaar Investco, which contributed around Rs 58 crore and Rs 16 crore, respectively, proportionate to their shareholding of 58.8% and 16%, the statement said.
Rs 25 crore allotment paused over FEMA, ECB concerns
TLPL, currently undergoing corporate insolvency resolution process, had remitted Rs 25 crore to subscribe to the rights issue. However, the allotment of shares to TLPL was put on hold on the basis of independent legal opinions from a former Supreme Court judge and a retired RBI general manager, both of whom indicated the debenture issuance and fund inflow did not comply with the Foreign Exchange Management Act (FEMA), guidelines on external commercial borrowings (ECB), and the Companies Act.
Riju Ravindran, a former TLPL promoter, has filed an application before the National Company Law Tribunal (NCLT), Bengaluru, claiming TLPL raised the Rs 25 crore by issuing Rs 100 crore of debentures to Byju’s Alpha Inc., a Delaware-incorporated special purpose investment vehicle, in a structure that may violate FEMA and the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, the statement said. The application is pending with the NCLT.
“It is clear the money received by TLPL is in the nature of a loan/debenture in the framework of external commercial borrowing and cannot be used for the purpose of acquisition of equity,” Sanjay Garg, head-legal, AESL, said in the statement. “If any inquiry was undertaken by a regulatory authority, Aakash could be accused of having allowed a rights issue, thereby enabling an ECB to be used for the purposes of investment into equity.”
Legal challenge failed, Rs 25 crore deposited
Earlier, TLPL’s resolution professional had unsuccessfully challenged the rights issue before the NCLT, National Company Law Appellate Tribunal (NCLAT), and the Supreme Court. After exhausting its legal options to block the rights issue, TLPL attempted to subscribe by depositing Rs 25 crore.
According to the statement, when AESL sought clarity on compliance, the resolution professional provided a debenture subscription agreement with Alpha Inc. along with a legal opinion stating no FEMA violations have occurred.
Until pending issues are adjudicated by the NCLT, the Rs 25 crore deposited by TLPL will be kept in a separate interest-bearing account, the statement added. Additionally, AESL indicated it may initiate another Rs 140-crore rights issue soon.