Aakash Educational Services Ltd (AESL) has found itself entangled in a complex situation as its minority stakeholders, Blackstone Group and the Chaudhry family, have reportedly declined to exchange their equity holdings in the test preparation subsidiary unit for shares in BYJU’S parent company, Think & Learn Pvt Ltd. This development comes after BYJU’S acquired Aakash for approximately $950 million in 2021, aiming to bolster its position in the education technology (edtech) sector.
BYJU’S, one of India’s leading edtech unicorns, had ambitious plans for Aakash, envisioning its initial public offering (IPO) by mid-2024, which could potentially provide the firm with much-needed financial relief. However, recent allegations of financial misconduct by US-based investment fund Davidson Kempner Capital Management against BYJU’S have raised concerns over the future of Aakash and the company’s IPO plans.
Under the original agreement, Blackstone and the Chaudhry family were expected to exchange their equity stakes in Aakash for shares in Think & Learn, based on BYJU’S valuation of $11 billion at the time. Blackstone was slated to receive approximately 0.75-1% stake in the parent entity, while the Chaudhry family was expected to receive around 1.5-2% stake.
Both stakeholders have cited various reasons for declining the share swap. Blackstone and the Chaudhry family pointed to governance issues in the parent entity as a major concern. Additionally, the Chaudhry family raised specific issues, including delays in filing FY22 financial statements, defaults with US lenders, and ongoing probes.
Furthermore, Davidson Kempner Capital Management’s allegations of financial misconduct against BYJU’S have added complexity to the situation. The investment fund declared the loan provided to BYJU’S as collateral for its Aakash shareholding to be in default.
These developments have put BYJU’S in a challenging position. The edtech unicorn had recently raised $250 million at a flat valuation of $22 billion through structured instruments from Davidson Kempner against its Aakash shareholding. This fundraising aimed to alleviate the financial burden the company was facing due to mounting losses, layoffs, and pending loans after the pandemic-led edtech boom.
In response to the mounting challenges, BYJU’S has been exploring options to divest a portion of its stake in Aakash. Think & Learn Pvt Ltd is considering reducing its stake in Aakash by up to 20%. A group of investors, led by Manipal Healthcare Enterprises founder Ranjan Pai, is also in discussions to invest between Rs 500-700 crore in Aakash.
While BYJU’S remains a dominant player in India’s edtech space, these recent developments surrounding Aakash have raised questions about the company’s growth trajectory and its ability to execute its IPO plans successfully.
Despite the uncertainties, the Ed-Tech industry in India continues to evolve rapidly, with Aakash’s situation being a noteworthy case study. As the sector gains momentum and attracts substantial investments, it will be crucial for companies to maintain transparency, compliance, and financial accountability to build a sustainable and resilient future. Only time will tell how the situation unfolds and what path BYJU’S and Aakash Educational Services Ltd ultimately take in the ever-evolving landscape of edtech in India.
