Manipal Group’s Ranjan Pai in talks to invest up to Rs 2,500 cr in Byju’s; Davidson Kempner to exit with Rs 1,400 cr

Edtech giant Byju’s is on the verge of a potential resolution to the ongoing dispute concerning the loan it secured from New York-based investment manager Davidson Kempner Capital Management, which is linked to its sole profitable entity, Aakash Educational Services.

Manipal Education and Medical Group’s Chairman Ranjan Pai is close to finalising a deal to invest up to $300 million (about Rs 2,500 crore at current exchange rates) in Byju’s, as per sources close to the development. The majority of this investment will be allocated to Aakash, with the rest eventually going to the parent entity, Think and Learn Private Limited.

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As an initial instalment, Pai will pay Rs 1,400 crore, inclusive of interest, to fully settle the Rs 800 crore loan that Byju’s had obtained from Davidson Kempner early this year. In August, the distressed debt specialist issued a legal notice to Aakash, asserting its claim to Aakash shares pledged as collateral for the loan.

The Bengaluru-based company has been embroiled in a disagreement with the Chaudhry family, the promoters of Aakash Institute, and private equity giant Blackstone Group over a previously arranged share swap agreement. Blackstone and the Chaudhrys refused to trade their stakes in Aakash for shares in Byju’s, citing clauses in the original share purchase agreement.

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Byju’s acquired Aakash, which offers students test preparatory coaching services for competitive exams, for about $1 billion in April 2021. The Blackstone Group and Chaudhry family together hold 30 per cent of Aakash; Byju’s parent firm Think and Learn Private Limited owns 43 per cent, while Raveendran has 27 per cent.

When the full investment is completed, Pai is set to secure a substantial 20-25 per cent stake in Aakash, while Byju’s personal stake is expected to decrease to approximately 12 per cent.

On the other end, Byju’s has placed two of its group firms—higher education platform Great Learning and US-based kids-focused digital reading platform Epic—on sale to raise immediate funds to meet the repayment obligations towards the TLB. The company hopes to gain close to a billion dollars from these divestments.

According to sources, Byju’s will first divest Epic, the company it acquired in a $500 million cash and equity deal in July 2021. While the company has identified potential suitors for Epic, it is awaiting a response from the TLB lenders on the repayment proposal it has put forth. The proceeds from a potential sale of EPIC will go towards repaying the first tranche of $300 million if the amendment proposal is accepted.

Last week, BT reported that founders of Great Learning are in early discussions to buy back the company from Byju’s.