Aakash Educational Services Limited (AESL) has deferred a planned share allotment to Think & Learn Pvt Ltd (TLPL), the parent company of Byju’s, raising fresh questions over alleged violations of foreign exchange and external borrowing rules. The move comes in the middle of a ₹100-crore rights issue at Aakash, where stakes of existing shareholders are being realigned as the coaching chain distances itself from Byju’s widening legal and regulatory troubles.
Rights issue proceeds, but Byju’s parent kept out:
Under the rights issue, AESL has already allotted shares to its two major shareholders, Manipal Group and Beeaar Investco, which contributed around ₹58 crore and ₹16 crore respectively in line with their 58.8 percent and 16 percent holdings in the company. TLPL, which is under corporate insolvency resolution, remitted ₹25 crore to subscribe to its portion of the rights issue, but the board has stopped short of issuing the corresponding shares.
AESL’s board said the subscription funds from TLPL may not comply with the Foreign Exchange Management Act (FEMA), the Companies Act and the Reserve Bank of India’s External Commercial Borrowings (ECB) guidelines. The company has therefore separated TLPL’s case from the rest of the issue, even as the rights offer remains otherwise complete.
Debenture route and FEMA, ECB red flags:
According to an application filed before the National Company Law Tribunal (NCLT), Bengaluru, by former TLPL promoter Riju Ravindran, TLPL raised the ₹25 crore by issuing ₹100 crore of debentures to Byju’s Alpha Inc., a Delaware-based special purpose vehicle. Ravindran has alleged that this structure may have breached FEMA rules, the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, and the ECB framework because the proceeds resemble an overseas loan being routed into Indian equity.
AESL sought clarity from TLPL’s resolution professional, who shared the debenture subscription agreement with Alpha Inc. and a legal opinion asserting that there was no FEMA violation. Aakash, however, commissioned independent legal reviews from a former Supreme Court judge and a retired RBI general manager, both of whom indicated that the debenture issuance and inward remittance did not comply with FEMA, ECB guidelines or the Companies Act. A senior advocate also opined that the structure fell foul of the RBI’s Master Direction on foreign investment in India and the ECB norms.
Sanjay Garg, head–legal at AESL, said the money received by TLPL is clearly in the nature of a loan or debenture under the ECB framework and cannot legally be used to buy equity in Aakash. He warned that allowing such a subscription could expose AESL to regulatory action for enabling an external commercial borrowing to be deployed into equity through a rights issue.
Insolvency backdrop and pending tribunal ruling:
The dispute plays out against the backdrop of TLPL’s ongoing corporate insolvency resolution process. TLPL’s resolution professional had earlier challenged the Aakash rights issue before the NCLT, the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court, but failed to secure a stay at any forum. After those legal attempts collapsed, TLPL tried to participate in the very rights issue it had opposed, by wiring the ₹25 crore subscription amount.
With conflicting legal views on the source and structure of the funds, AESL’s board has decided to defer share allotment to TLPL until the NCLT adjudicates the matter. The ₹25 crore remitted by TLPL will be parked in a separate interest-bearing account in the meantime, insulating Aakash from potential regulatory fallout while preserving the funds pending the tribunal’s verdict.
Aakash hints at new capital raise amid separation from Byju’s:
Byju’s influence over the offline test-prep giant continues to decline as Aakash has indicated plans for another rights issuance of roughly ₹140 crore to strengthen its finance sheet and promote expansion, even as it ring-fences TLPL’s subscription. With creditors, authorities, and courts all closely examining every financial transaction connected to Byju’s, the move highlights an ongoing realignment in the relationship between Aakash and its problematic parent business.
For now, the deferred allotment marks yet another setback for TLPL, which is already battling lenders, trustees and former partners over alleged fund diversion and regulatory breaches in India and overseas. The eventual NCLT decision on whether the debenture-funded subscription violates FEMA and ECB rules will be closely watched as a test case for how aggressively regulators and courts police complex cross-border funding structures in stressed Indian companies.
