Aakash puts Think & Learn's ₹25-cr allotment on hold over forex red flags

Former SC judge and ex-RBI official flag possible in remittance made by edtech firm

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Aakash Educational Services Limited (AESL),a subsidiary of the company that runs edtech firm Byju’s, has completed a Rs 100 crore rights issue, allotting shares to existing investors Manipal Group (Rs 58 crore) and Beeaar Investco (Rs 16 crore) proportionate to their stakes.

 

AESL, however, put share allotment to Think & Learn Pvt Ltd (TLPL) on hold, saying the Rs 25 crore deposited by Byju’s parent firm does not comply with the Foreign Exchange Management Act (FEMA), the Companies Act, 2013, and guidelines for external commercial borrowings (ECB).

 

TLPL is under corporate insolvency process and the resolution professional had unsuccessfully opposed the rights issue before tribunals and the Supreme Court. Yet, TLPL tried to subscribe to the rights issue by depositing Rs 25 crore. Riju Ravindran, a former promoter of TLPL, has filed an application before the National Company Law Tribunal (NCLT), Bengaluru, alleging that TLPL raised the money for its Rs 25-crore rights issue subscription by issuing Rs 100 crore of debentures in a structure that may violate foreign exchange rules and guidelines. The NCLT is examining Ravindran’s allegations.

 

“It is clear the money received by TLPL is in the nature of a loan or debenture in the framework of external commercial borrowing and cannot be used for the purpose of acquisition of equity i.e., shares in Aakash. 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,” said Sanjay Garg, head, legal, AESL.

 

On AESL’s insistence for clarity about compliance of funds, the resolution professional provided the Debenture Subscription Agreement executed between TLPL and Byju’s Alpha Inc. (a Delaware-incorporated investor), along with a legal opinion stating that the subscription money did not violate FEMA laws.

 

AESL then obtained independent opinions of a former Supreme Court judge and a retired central bank general manager, who indicated that the debenture issuance and the inflow of funds did not comply with FEMA, ECB Guidelines, or the Companies Act. Separately, a senior advocate said the structure of the debenture investment did not meet FEMA requirements, the Master Direction on Foreign Investment in India; and the ECB Guidelines.

 

After considering all legal opinions, the board deferred allotment of shares to TLPL until the pending issues are adjudicated by the NCLT, Bengaluru. The Rs 25 crore deposited by TLPL is likely to be kept in a separate interest-bearing account pending final decision.

 

AESL also indicated that the company may initiate another Rs 140-crore rights issue shortly.