The Aakash board has given the green light to convert the $300 million investment made by Pai in 2023 into equity, valuing the company at around $700 million and making it debt-free. People familiar with the matter indicate that Ranjan Pai, chairman of Manipal Education and Medical Group, is poised to become the largest shareholder in Aakash Institute, with a 40% stake.
Byju’s parent, Think & Learn, executed the acquisition of the brick-and-mortar coaching chain for $950 million in 2021, marking one of the largest acquisitions in the Indian internet sector. As of Wednesday’s press time, an email sent to Aakash Institute has not elicited a response. Both Pai and Raveendran have declined to comment.
Ranjan Pai’s Larger-Than-Expected Investment Plans in Aakash
In October last year, ET reported about Ranjan Pai’s plans to write a larger-than-expected cheque for the offline coaching company. Now, the MEMG chairman will exercise firm control over the crown jewel, Aakash, while Byju’s grapples with a series of crises stemming from governance lapses.
A person briefed on the matter stated, “The board has approved the conversion, and Pai is now the largest shareholder. He has been closely involved with Raveendran in sorting out the Davidson Kempner debt issue and other matters too.” The ‘Pai factor’ is deemed critical for the fate of both Aakash and Byju’s.
Pai’s $200 Million Boost to Aakash Institute and Board Expansion
In November of last year, Ranjan Pai injected nearly $200 million into Aakash Institute, aiding Byju’s in clearing its debt and interest owed to US-based Davidson Kempner. Raveendran, the founder of the edtech major, had additionally borrowed capital from Pai, pledging his personal stake in Aakash for Think & Learn’s daily operations. Cumulatively, Pai, Raveendran, and Think & Learn are set to hold 80-82% of Aakash, while private equity firm Blackstone and Aakash promoters, the Chaudhrys, will retain the remaining 18%. Described as a “white knight for Byju’s” by an informed source, Pai’s role becomes crucial as the company grapples with survival challenges.
Following regulatory approval, Pai will secure additional seats on the Aakash board, a typical move for the investor known for increased infusions in new-age firms at attractive valuations. Notably, Pai holds a 15% stake with three directorships in online pharmacist PharmEasy.
Beyond Byju’s, Pai has extended his investments to IPO-bound FirstCry and omnichannel jewellery retailer BlueStone, among others. These moves follow his partial cash-out from Manipal Hospitals in a sale to Singapore government-owned Temasek in April 2023.
Uncertainty Surrounds Stakes of Blackstone and Chaudhrys in Aakash
The fate of the stakes of Blackstone and Chaudhrys in the offline coaching company remains unclear, with ongoing discussions. The stock swap in Think & Learn for these two shareholders is still pending, and negotiations have been in progress for a while. Aakash Chaudhry, whose father JC Chaudhry founded the institute over 35 years ago, has engaged in discussions about returning as chief executive.
Aakash Institute witnessed a 40% surge in revenue to Rs 1,491 crore in FY22, accompanied by a profit of close to Rs 80 crore. Results for FY23 are pending.
Capital Crunch May Force a Rights Issue at Substantial Valuation Drop
On January 23, ET reported online first that Byju’s desperate need for capital could prompt it to undertake a rights issue, potentially at a valuation ranging from $500 million to $1 billion. This marks a significant decline from its peak value of $22 billion three years ago.
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