Amid Debt Crisis, BYJU’S In Talks With Investors To Sell Stake In Aakash

Beleaguered edtech major BYJU’S is reportedly in talks with investors to sell a portion of its stake in its offline coaching subsidiary Aakash Education Services. 

Sources told news channel ET Now that Think & Learn, BYJU’S parent company, is mulling diluting up to 20% of its stake in Aakash. As per the report, the talks are still at the preliminary stage. 

BYJU’S currently holds a 70% stake in Aakash, while the founding Chaudhary family and BlackRock own the remaining 30% stake in the coaching institute company. 

The edtech major acquired Aakash Education for $950 Mn in 2021.

Earlier this month, BYJU’S said it was aiming to come out with the initial public offering of Aakash around mid-2024. However, the multiple crises which it is facing currently seems to have now forced BYJU’S to consider stake sale in Aakash.

The murmurs of stake sale come as US hedge fund David Kempner, which previously finalised a deal to provide $250 Mn in debt funding to BYJU’S, reportedly put the plans under review and is yet to transfer the money. 

The new development also emerges days after Deloitte resigned as the auditor of the company while three key board members – Peak XV Partners’ MD GV Ravishankar, Russell Dreisenstock of Prosus, and Chan Zuckerberg Initiative’s Vivian Wu – also quit the company board. 

BYJU’S String Of Troubles

India’s most valued startup has been looking to douse fires that have engulfed it on multiple fronts in the past more than a year. The genesis of all its troubles can be traced back to last year as the pandemic-fueled growth came to an abrupt stop as schools reopened and online education took a backseat.

As funding winter enveloped the Indian startup ecosystem, capital suddenly became scarce and investors became wary. Even as many of BYJU’S acquisitions such as WhiteHat Jr turned sour, questions began to emerge over the delayed filing of financial results by BYJU’S.

Afterwards, when it released its FY21 numbers towards the fag end of 2022, its ballooning loss, which rose nearly 20X YoY to INR 4,588 Cr, brought even more spotlight on the company. Critics also flagged lax corporate governance structures at the company.

It is also yet to file financial numbers for the fiscal year 2021-22 (FY22) which has further spooked VC and PE firms. 

As pressures mounted to move towards profitability, BYJU’S undertook multiple rounds of layoffs at the company which is said to have impacted 5,000 employees since the beginning of 2022.

Then, there have also been the company’s multiple run-ins with the law. While previously it was under the NCPCR’s radar for mis-selling its courses, the company received a major blow after ED sleuths landed at multiple premises linked to the company, earlier this year, to conduct raids for flouting foreign exchange norms.

Making matters worse has been a potential debt crisis that has been looming over the edtech giant for some time now. Earlier this month, BYJU’S missed payments for its TLB and sued one of its creditors in the New York Supreme Court. 

Amid the fracas, the company also grabbed negative headlines for delayed provident fund (PF) payments. Piling on top of this, multiple investors including BlackRock and Prosus have slashed the valuation of the edtech major on their books. 

In some relief last week, a US court threw out the petition filed by a consortium of edtech major’s lenders that sought to probe the $500 Mn transfer by BYJU’S’ US arm to its multiple subsidiaries. Right afterwards, the creditors also extended the cooperation agreement signed with the edtech major by an additional three months. 

Despite the controversies, cofounder and CEO Byju Raveendran seems unfazed. In a virtual town hall earlier this week, he said that the company would be alright, claiming that four of its six acquisitions were profitable. He also told employees to ‘rise above the noise’ even as the company disabled the chat feature at the virtual event.