BYJU’S, Aakash Shareholders Flag Valuation Concern Over Ranjan Pai’s $300 Mn Conversion Move

SUMMARY

The primary concern of the shareholders is that such a move will dilute their shares in the company

Blackstone and Prosus NV have written to the parent company Think and Learn, expressing their concerns about the matter

The shareholders further added that the approval for the conversion was given on the basis of a much lower valuation of INR 4.5K Cr to INR 4.8 Cr than the price paid by BYJU’S in 2021 to acquire Aakash, which was about $950 M

Days after beleaguered edtech giant BYJU’S-owned Aakash Institute’s board approved conversion of $300 Mn investment made by Manipal Education and Medical Group (MEMG) chairman Ranjan Pai last year into equity, the shareholders have objected to the move, flagging concern that it would dilute the value of their stakes.

According to ET’s report, the investors Blackstone and Prosus NV have written to BYJU’S parent entity Think and Learn, expressing their concerns about the matter. In addition, Prosus has also sent a legal notice to Pai on the ground.

The approval to convert Pai’s debt investment into equity was given by the board of Aakash, last week. However, the entire process of the conversion is yet to be completed.

“The working committee of investors (of BYJU’S) has registered its disapproval,” ET reported citing its source in the company.

The primary cause of such objection is that the shareholdings of the other investors in the parent company includes valuation of Aakash as a subsidiary. The shareholders further added that the approval for the conversion was given on the basis of a much lower valuation of INR 4.5K Cr to INR 4.8 Cr (approximately $600 Mn) than the price paid by BYJU’S in 2021 to acquire Aakash, which was about $950 Mn (approximately INR 7.8 Cr).

In addition to the mentioned investors, others have also been reported to have raised objections to the conversion as the proposal (if approved) will take Pai’s stakes in the company to 38.6% to 39.6% making the parent entity’s shares fall to 27% from 43%.

Further, shareholdings of Blackstone and Aakash Institute’s found Aakash Chaudhary’s stakes will decline to 18% from 30%. Meanwhile, Byju Raveendran’s stakes will fall to 16%.

The development comes after Pai invested $168 Mn in Aakash Institute, in December 2023.

For the financial year 2021-22, BYJU’S consolidated net loss crossed the INR 8,000 Cr (about $1 Bn) mark. Meanwhile, its operating revenue rose 120% Y-o-Y to INR 5,014.6 Cr during the same year, majorly relying on the improvement in the financial performance of Aakash.