Ranjan Pai books Aakash seat with $168 mn deal

Manipal Education and Medical Group chairman Ranjan Pai has invested Rs 1,400 crore (around $168 million) in Aakash Institute, a subsidiary of troubled edtech major Byju’s. This paves the way for the Bengaluru company to clear its debt to the US-based lender Davidson Kempner Capital Management, people aware of the matter said.

Pai’s payout to Davidson Kempner was through a bilateral debt transaction. An entity of Pai purchased all the non-convertible debentures (NCDs) of Aakash held by Davidson Kempner on NSE Cbrics platform on Friday.

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Davidson Kempner held about 15-20% in Aakash through the pledged shares for the loan. These shares have been transferred to Pai, post the transaction.

The MEMG chief is also likely to get two board seats on Aakash and will be approaching the antitrust regulator –the Competition Commission of India–for approval on the investment, according to the people cited above. Further, there is a discussion underway that Pai’s nominee may also be the board chair at Aakash, but it is yet to be finalised, they added.

Davidson Kempner and Byju's  A timeline_Graphic_ETTECHETtech

Of the Rs 1,400 crore being paid to Davidson Kempner, Rs 800 crore is the loan amount and the remaining Rs 600 crore is in interest, the sources said. This would be a 75% gain on the initial loan given to Byju’s.

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Over the next 30-45 days, Pai is also likely to enhance his investment in the test-prep firm, which will eventually give him a 25-30% stake in the company. His investments will be in Aakash and not in Think and Learn, people aware of the matter said.

An email sent to Davidson Kempner did not elicit an immediate response while Pai declined to comment.

ET had first reported on October 12 that Pai, who is investing through his family office, was likely to cut a much bigger cheque for Byju’s Aakash as part of a multi-stage investment plan. Pai’s investment talks had initially begun with the idea of infusing about $70-80 million.

In May, Byju’s had signed a Rs 2,000-crore ($240 million) structured credit deal with Davidson Kempner against the cash flows of Aakash Institute. The Bengaluru-headquartered edtech firm had, however, only received about Rs 800 crore ($96 million), when an alleged covenant breach was triggered by the lender. Soon, both parties began talks to settle the dispute.

Pai’s investment in Aakash is also linked to the promoter of the brick-and-mortar coaching centre business, Aakash Chaudhry, returning as CEO of the unit.

Chaudhry’s return is likely to happen along with him completing the share-swap in Byju’s parent Think and Learn, as part of the original deal announced two years back. ET had reported on October 12 that Pai had engaged private equity firms to invest in Aakash once the pending share-swap closed with the Aakash promoters. Blackstone is another key investor in Aakash, with a stake of about 12%.

In 2021, Byju’s had acquired Aakash Institute for $950 million, its biggest acquisition, as part of an aggressive M&A strategy. The original deal constituted 70% cash and 30% equity. After a shareholder tussle, the stock-swap with the Chaudhry family is now in the final stages.

The Chaudhry family holds an 18% stake in Aakash. ET had reported on October 16 saying Aakash Chaudhry is likely to retain around 8-9% in the offline coaching centre unit and about 1-2% in Byju’s parent Think and Learn–once the stock swap is complete.

Pai’s increasing Pie

Bengaluru-based Pai has been busy placing multiple bets in the new economy in recent months as these startups go through a complete reset in their pricing as well as strategies. ET reported on November 1 saying Pai is getting three board seats in online pharmacy PharmEasy as part of his investment of around Rs 1,300 crore. He has emerged as the largest shareholder in the Mumbai-based firm after its Rs 3,500 crore rights issue at a 90% discount to the peak valuation of $5.6 billion in 2021. Pai has also picked up stakes in startups like omnichannel jewellery seller Bluestone, beauty products retailer Purplle.

Byju’s results

On November 4, Byju’s finally reported its delayed audited financials for the year ended March 2022 — in parts — showing a 2.3 times growth in revenue to Rs 3,569 crore in its standalone business. Ebitda loss of the core business — financials for which were reported — was down to Rs 2,253 crore in FY22, from Rs 2,406 crore in the previous year, according to a company statement. Ebitda is earnings before interest, taxes, depreciation, and amortisation.

Byjus audited financials (1)ETtech

The financials released last week did not include earnings for Aakash and other acquisitions made by Byju’s parent firm.

The revenue is much lower than earlier projected by the Bengaluru-based firm on an unaudited basis. In fact, last year, while announcing its FY21 audited results, Byju’s said in a press statement that for fiscal year 2022, it has clocked Rs 10,000 crore in gross revenue on a consolidated basis including all subsidiaries.

The latest results have come after a delay of more than a year. Byju’s had filed financials for FY21 in September 2022 after an 18-month delay, with revenue readjusted to Rs 2,280 crore and losses swelling to Rs 4,588 crore.

Read ETtech’s detailed coverage on the developments at Byju’s

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