BYJU’S-Aakash Battle Over Share Swap Deal: What Happens Next?

Edtech giant BYJU’S parent company Think and Learn Pvt Ltd (TLPL) has sent a legal notice to Aakash Educational Services Limited (AESL) founders due to their alleged resistance to complete a share swap.

BYJU’S acquired Aakash Educational, the chain of physical coaching centres, in April 2021 for a amount close to $1 Bn.

As part of the agreement for the acquisition deal, the Chaudhry family sold Aakash Educational Services to Think and Learn for a combination of cash and shares. The share swap is meant to complete this deal.

The two companies wanted to execute the share swap through a merger of AESL with TLPL, which would allow the Chaudhry family and Aakash’s other investor Blackstone to save on tax payments, as per sources who spoke to Inc42.

BYJU’S declined to comment on the reported notice sent to Aakash founders.

However, due to delays in the proposed merger by the National Company Law Tribunal (NCLT), TLPL has invoked the unconditional fallback agreement and issued a notice to the Chaudhrys, requesting the execution of the swap deal, sources added.

On completion of the existing share swap obligation, the Chaudhry family’s stake in TLPL would be slightly below one percent. However, the share swap deal without the merger going through could result in a significant tax bill for the Chaudhrys, including on GST on this transaction.

As per sources, the Chaudhry family currently has an 18% stake in Aakash, while BYJU’S and founder Byju Raveendran collectively hold 70% stake. The rest is owned by PE firm Blackstone.

We were also told that the Choudhry family and Blackstone might push for a cash deal over a share swap as the share swap is likely to be legally enforced by BYJU’S, which would result in an upfront tax outlay for both the parties that have a sizable stake in Aakash.

The notice from BYJU’S comes on the heels of its announcement that Aakash would list publicly by mid-2024. It’s not clear what happens to those plans since the past few weeks have seen a lot of restructuring in both BYJU’S and Aakash.

Like BYJU’S, Aakash has not filed its financial statements for FY22 or FY23. In FY21, Aakash’s revenue from operations dropped 23.5% to INR 982.7 Cr from INR 1,214 Cr in FY20. Its profit also dropped 73.6% to INR 43.6 Cr in FY21 from INR 165.7 Cr in FY20.

Peak VX Partners’ GV Ravishankar, Chan Zuckerberg Initiative’s Vivian Vu, and Prosus’ Russell Dreisenstock resigned from the BYJU’S board last month. BYJU’S auditor Deloitte Haskins and Sells also resigned citing the delay by the company in filing its financial statements for FY22.

It’s not clear whether BYJU’S problems with its auditors are also the reason behind the delay in Aakaash’s financials.

The physical coaching giant saw the exit of two independent directors of its coaching arm Aakash Educational Services Ltd (AESL) earlier in July 2023. Two lawyers associated with legal firm Shardul Amarchand Mangaldas & Co – Amit Khansaheb and Vishruta Kaul – reportedly resigned, just weeks after directors resigned from BYJU’S.

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