PE firms show interest in potential stake in Byju’s owned Aakash

More than two years after embattled edtech major Byju’s acquired tutorial chain Aakash for nearly $1 billion, Byju Raveendran is reportedly looking to sell a controlling stake in it. According to a report in The Economic Times, Raveendran is in early-stage discussions with private equity (PE) firms, including Bain Capital and KKR, to explore the potential sale of a controlling stake in Aakash. The offline coaching chain is Byju’s largest revenue maker and a potential stake sale is coming amid severe financial crisis that Byju’s had found itself into, for nearly 2 years now.

To facilitate these negotiations and potentially alleviate the financial pressures on Byju Raveendran, Ranjan Pai, the chairman of the Manipal Group, has offered financial support. This support is aimed at clearing dues to lenders and providing a more stable financial foundation for the founder of Byju’s. Reports suggest that Raveendran is aiming for valuation of ₹7000-8000 crore, similar to what he had bought the company for.

Ranjan Pai’s investment plan involves a $100 million equity investment through secondary share purchases from Byju Raveendran. Additionally, he is contemplating a structured debt investment of $170 million to assist Byju’s in settling dues to hedge fund Davidson Kempner. While this financial backing is seen as a valuable lifeline, it is anticipated to result in a substantial dilution of Byju Raveendran’s stake in Aakash, apart from the stake sale being already contemplated.

These negotiations are multi-faceted, involving the participation of PE firms, the potential return of Aakash Chaudhry, and the vital financial support from Ranjan Pai. The immediate concern remains the settlement of dues owed to Davidson Kempner (Byju’s owes it a total of $96 million). With Ranjan Pai stepping in as an anchor, PE firms are beginning to see a potential buyout opportunity, further adding layers to the intricate negotiations.

The Economic Times reports that some PE firms, including Carlyle, are open to supporting Aakash Chaudhry, the former CEO of AESL and a member of the family that founded the institution, in buying back the company. This is a notable twist, given that Chaudhry and his family, along with PE firm Blackstone, had sold AESL to Think and Learn Pvt Ltd (TLPL), the parent company of Byju’s, two years ago for a notable sum, as stated earlier.

In line with the majority of PE firms’ preferences, a fundamental condition for their involvement is a change in management control. Reports state that these firms are seeking at least 51% of the stake in Aakash, indicating their intent to play a substantial role in the management and operations of the educational service provider. However, this has not been given the green light by Byju’s, which has firmly denied the possibility of any sale of Aakash, emphasizing the institution’s core role in the growth strategy of Think and Learn Pvt Ltd.

Byju’s has officially denied all such reports.

“Think and Learn Pvt Ltd is not considering any sale of Aakash Education Services Ltd. AESL is core to the growth strategy of T&L,” a spokesperson for Byju’s commented on the matter. “Byju is juggling multiple balls. The immediate concern will be to settle DK’s dues. The idea is to take forward the deal that comes through,” an executive said. “So with Ranjan Pai as an anchor, PEs are smelling a buyout opportunity.”