SUMMARY
Last Thursday, lenders of BYJU’S $1.2 Bn term loan approached the city court, seeking an ex-parte injunction on the transaction
The lenders raised concerns in their petition to the court regarding Ranjan Pai's conversion of debt into equity at a reduced valuation of $600 Mn
The lenders argued that the proposed deal adversely affects the interests of Think & Learn's lenders
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Beleagured edtech giant BYJU’S breathed a sigh of relief after a civil court in Bengaluru has declined to grant a plea by its lenders challenging the 40% stake buyout by Manipal Education and Medical Group’s (MEMG) chairman Ranjan Pai in the company’s subsidiary Aakash Institute.
Lenders of BYJU’S $1.2 Bn term loan approached the city court last week, seeking an ex-parte injunction on the transaction allowing Pai to convert a loan of about $250-$300 Mn he had advanced to the brick-and-mortar coaching network into equity in the Aakash Institute, ET reported, citing sources close to the matter.
The lenders raised concerns in their petition to the court regarding Pai’s conversion of debt into equity at a reduced valuation of $600 Mn. This valuation stands in contrast to the $950 Mn valuation assigned to the Aakash Institute when it was acquired by BYJU’S parent company, Think & Learn, in 2021.
The lenders argued that the proposed deal adversely affects the interests of Think & Learn’s lenders. This group of lenders holds an 80% stake in the term loan that BYJU’S secured in November 2021.
It was reported last month that the Aakash Institute is set to see Pai emerge as its largest shareholder with a 40% stake buyout.
The board of Aakash had given the nod to the conversion of $300 Mn investment made by Pai in 2023 into equity.
Days after that, the shareholders had objected to the move, flagging concern that it would dilute the value of their stakes.
Meanwhile, Pai has already sought approval from the Competition Commission of India for his acquisition of a significant stake in the Aakash Institute. He plans to invest additional capital to support its operations during the upcoming student enrollment season.
In the fiscal year ending March 31, 2022, BYJU’S reported a net loss of over INR 8,000 Cr (about $1 Bn). However, the operating revenue surged by more than 120% to INR 5,014.6 Cr, mainly driven by improved performance from Aakash.
Aakash Institute’s profits widened by 82% to INR 79.5 Cr, and its revenue increased by 45% to INR 1,421.2 Cr in FY22 from INR 982.7 Cr in FY21.
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