BYJU’S Settles Dispute With Davidson Kempner As Ranjan Pai Acquires Debt

In significant relief to BYJU’S, the family office of Manipal Group chairman Ranjan Pai has acquired the $250 Mn debt availed by the edtech giant’s offline coaching arm Aakash Educational Services Limited (AESL) from Davidson Kempner.

Pai paid out the US-based investor in a bilateral debt transaction, sources close to the edtech giant told Inc42. An entity of Pai purchased all the non-convertible debentures (NCDs) of Davidson Kempner on the NSE Cbrics platform today, the sources added. 

Inc42 couldn’t independently verify the transaction. A BYJU’S spokesperson declined to comment on the matter.

In May, BYJU’S signed a $250 Mn (around INR 2,000 Cr) structured credit deal with Davidson Kempner against Aakash’s cash flow. However, the edtech company has only received INR 800 Cr from the loan. BYJU’S has reportedly used over INR 600 Cr from the facility.

Over the next few months, a breach of the loan term covenant triggered the US-based investor to start talks to return the money. At the same time, Davidson Kempner allegedly restructured Aakash’s board of directors. Though neither party commented on the development, media reports were strife with speculation around Aakash’s future.

BYJU’S and Davidson Kempner started negotiations for a settlement in August this year.

As per the sources quoted above, Pai is also in talks to acquire more stake in Aakash, as has been widely reported in the media over the past few months. Pai and BYJU’S go back nearly a decade, as Pai’s Aarin Capital was one of the first institutional investors in the edtech decacorn. 

According to an ET report, the Manipal Group chairman paid $168 Mn (about INR 1,400 Cr) to acquire the NCDs from Davidson Kempner. This will settle the credit used and the interest incurred on the same.

An overview of AESL’s shareholder distribution portrays BYJU’S parent, Think & Learn Private Limited, as the dominant stakeholder at 40%, followed by BYJU’S CEO Byju Raveendran with a 30% share. The Chaudhry family, the founders of AESL, hold an 18% stake, and Blackstone possesses the remaining 12%.

Ranjan Pai is likely to close ongoing investment talks for AESL once the share-swap agreement between AESL, BYJU’S and Blackstone is settled, which will eventually give him a 25-30% stake in the company. His investment will be in AESL and not Think and Learn.

The development comes at a time when BYJU’S has been looking to stabilise its ship by settling disputes with lenders and selling off US-based assets to focus on the Indian business. The edtech giant is looking to sell two of its US-based subsidiaries, Great Learning and Epic, to raise up to $1 Bn in cash, which it would deploy to repay its debts, including the $1.2 Bn term loan B.

After multiple delays, BYJU’S last week reported select numbers from its standalone financial statement for FY22. The company said its standalone EBITDA loss stood at INR 2,253 Cr in FY22 as against an EBITDA loss of INR 2,406 Cr in FY21. However, it didn’t disclose the net loss and the consolidated numbers.