Arbitrator Orders BYJU’S To Not Sell Aakash Shares

SUMMARY

The order came in response to Ranjan Pai’s MEMG Family Office initiating arbitration proceedings against BYJU’S last month over breach of terms of a $42 Mn loan

BYJU’S has been asked to not dispose of the 4 Mn shares of Aakash Education, which as per the loan agreement amounted to 6% stake in the coaching institute last year

BYJU’S said it couldn’t allot the shares as it failed to obtain approvals from certain investors in time for the transfer of shares to MEMG Family Office

Adding to the number of legal cases being faced by edtech giant BYJU’S, an arbitrator has asked the beleaguered startup to not sell 4 Mn shares of its subsidiary Aakash Educational Services.

The order came in response to Ranjan Pai’s MEMG Family Office initiating arbitration proceedings against BYJU’S last month over breach of terms of a $42 Mn loan, Reuters reported.

As part of the loan agreement, BYJU’S was to transfer a certain number of shares of Aakash Education to MEMG Family Office.

Citing the order of the arbitrator, appointed under the Singapore International Arbitration Centre rules, Reuters said BYJU’S has been asked to not dispose of the 4 Mn shares of Aakash Education, which, as per the loan agreement, amounted to 6% stake in the coaching institute last year.

During the arbitration proceedings, BYJU’S said it couldn’t allot the shares as it failed to obtain approvals from certain investors in time for the transfer of shares to MEMG Family Office.

BYJU’S did not comment on Inc42’s queries on the development. Sources within the company said that despite the arbitration proceedings, there is no animosity between BYJU’S and the investor.

Given the legal turmoil at BYJU’S, Pai initiated the arbitration proceedings to safeguard his interest in Aakash Education, the sources added.

Earlier this year, it was reported that Pai became the largest shareholder of Aakash Education with a 40% stake, following his investment of over $300 Mn in the coaching institute.

In January this year, the lenders of BYJU’S $1.2 Bn Term Loan B objected to Pai acquiring a stake in Aakash Education. They approached a civil court in Bengaluru seeking an ex-parte injunction on the transaction allowing Pai to convert a loan of about $250-$300 Mn into a stake in Aakash Education. However, the court declined to grant the lenders any relief in the matter.

It is pertinent to note that Aakash Education is the crown jewel of BYJU’S. In February, Inc42 reported that the coaching institute is likely to report over 60% year-on-year increase in operating revenue to INR 2,325.1 Cr in FY23, while net profit is seen rising to INR 330 Cr from INR 79.5 Cr in FY22.

BYJU’S has been fighting on multiple fronts over the last year or so. Exits of board members, ongoing legal battles with investors and lenders, insolvency proceedings, delay in filing financial statements, rising losses, delay in paying employee salaries due to a cash crunch are among the problems being faced by the startup, which was once valued at $22 Bn.