Dr. Ranjan Pai, the Chairman of Manipal Group is being seen as a rescuer, for Aakash, an ed-tech company owned by Byjus that is currently facing difficulties. As an investor in Byjus Dr. Pai’s family office is in talks to invest, around $90 million, which would greatly assist the struggling giant and provide some much-needed relief.
Dr. Ranjan Pai, Chairman of Manipal Group, is currently in early discussions to invest in Aakash, an edtech firm owned by Byju’s. This move positions Pai as a white knight stepping in to aid the embattled company, completing a full circle as he was one of Byju’s earliest investors.
Previously, Pai invested through Aarin Capital, but this time, he is expected to invest Rs 500-700 crore ($80-$90 million) through his family office. As an experienced entrepreneur and investor, Pai recently relinquished a controlling stake in Manipal Hospitals to Singapore’s Temasek, marking the largest deal ever by a private equity fund in India’s healthcare sector. Additionally, he runs the Manipal group of educational institutions.
Byju Raveendran, who holds a 30 percent stake in Aakash, is likely to sell a portion of his stake to Pai. Furthermore, the company is seeking an additional $200 million (Rs 1,600 crore) in funding for Aakash, with sovereign wealth funds also showing interest.
The funds obtained from the investment would be used to repay about Rs 800 crore to Davidson Kempner, as Byju’s faced a technical default on the loan it raised in May. Raveendran also intends to release the pledge on Aakash shares, which were used as collateral for the Davidson Kempner loan.
Acquiring Aakash Educational Services for close to $1 billion in 2021 has proven to be Byju’s most successful acquisition so far. However, the due diligence for the deal has not been without challenges. The shareholders of Aakash, including Blackstone, have been hesitant to execute the share swap due to concerns over Byju’s declining value.
Investing in Aakash could be a wise move for Ranjan Pai, considering its cleaner structure, profitable business model, and clear path to an IPO. This investment may also facilitate bringing in other investors for Byju’s.
The funding would provide much-needed relief to Byju’s, which is currently facing various challenges, including liquidity constraints due to extended fundraising for its parent company, Think and Learn Pvt.
The investment also indicates Raveendran’s intention to address debts while inviting trusted equity investors to join the ownership of the company, especially amidst ongoing struggles with term loan B creditors in the US.
Ranjan Pai initially invested in Byju’s in 2011 through his venture capital fund Aarin Capital, and Aarin eventually exited the company with significant returns as Byju’s raised over $5 billion over the past decade.
Byju’s has been actively pursuing a substantial fundraising effort since the beginning of the year, but the funding round has not been finalized yet, leading the company to implement cost-cutting measures.
In May, Byju’s signed a definitive agreement with Davidson Kempner to raise $250 million linked with future cash flows of Aakash Educational Services. However, Byju did not meet certain covenants of the agreement, leading Davidson Kempner to withhold more than half of the amount.
According to a report, Davidson Kempner has accused Byju of accessing Rs 100 crore from an escrow account, which they were not supposed to do.
