Aakash Acquisition: BYJU’S Again Fails To Clear Blackstone’s Dues

In what appears to be mounting trouble for BYJU’S, the edtech major has reportedly again missed the deadline to pay more than INR 1,500 cr in dues to private equity firm Blackstone. 

The dues purportedly pertain to the INR 7,300 Cr acquisition of the tutorial chain Aakash Educational Services that was executed in April last year. 

Of the total amount due to Blackstone, a source told Mint that BYJU’S promised to pay INR 1,500 Cr – INR 1,620 Cr to the private equity firm by June 2022. Subsequently, the edtech major’s audited financial reports for the financial year 2020-21 (FY21), released earlier this month, stated that all pending payments to Blackstone would be cleared by September 23. 

Adding further, sources said that the payment was yet to be transferred. While one source said that the pending amount would have to be paid in the next ten days, another source noted that the payment ought to happen soon. 

The deal which was initiated last year is still far from completion. While the coaching chain’s founder Aakash Choudhary was paid in July this year, Blackstone’s dues have reportedly been stuck due to RBI’s pricing guidelines. 

The edtech startup’s cofounder Byju Raveendran recently told a news publication that there has been no delay but rather the deal is stuck in a regulatory quagmire. According to the central bank’s norms, an Indian entity cannot pay an overseas investor more than an entity’s fair market value. 

He had then also said that the final payment to Blackstone would peg BYJU’S stake at a higher price than the 6the fair market value. He had also told the portal that the edtech startup thought that a two-month delta would be enough to reach the FMV level, but then raised it to three months. 

It looks like even that has not worked in BYJU’S favour and could likely delay the final tranche of payment to Blackstone. The private equity firm is also patiently waiting for the approval to the acquisition deal from National Company Law Tribunal (NCLT), as it will open the floodgate for Blackstone to receive additional shares amounting to 0.75%-1% in BYJU’S.

A Saga Of Issues

BYJU’S has been under fire for a slew of reasons. The delayed financials had cast a pall of gloom over the edtech startup as critics sought more transparency and higher corporate governance standards.

Apart from that, there are also issues surrounding accounting practices employed by the edtech major. Such has been the furore around the startups that it even forced veteran investor Shankar Sharma to lash out at BYJU’S investors for allowing questionable accounting practices at the company.

Complicating matters for the edtech giant appear to be the purported fundraises where the amount promised by certain investors has not come in. What has stood out is the $250 Mn promised by Sumeru Ventures and Oxshott Capital Partners that has been delayed due to ‘macro-economic reasons.’

The startup has also been plagued by allegations of predatory practices employed by its staff to onboard students. In many instances, kids have been made to avail of BYJU’S services without even delving into whether the student’s parents would be able to pay for such services. 

Another matter at heart appears to be the ‘funding winter’ chill that has engulfed the Indian startup ecosystem. With investors across the board wary of capital infusion, edtech startups have borne the brunt of the paucity of liquidity. The funding winter has forced startups to shelve expansion plans and cut corners to save money.

Meanwhile, the biggest threat facing BYJU’S appears to be the waning effect of the pandemic. With students back to school, the online mode of education has taken a major hit. 

While BYJU’S had invested a lot of energies on the online model, it appears that the world is back to the phygital and the offline model. With cash scarce, the edtech players are treading slowly into the new domain of physical tuition centres. 

Despite this, the Indian education sector continues to be the focal point of many of these startups. According to an Inc42 report, the Indian edtech sector is anticipated to reach a market size of $10.4 Bn by 2025.