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Aakash Institute Shareholders Raise Concerns Over Ranjan Pai's $300 Million Conversion Proposal

According to ET reports, Blackstone and Prosus NV have written to BYJU’S parent entity Think and Learn, expressing their concerns about the matter.

Aakash Institute Shareholders Raise Concerns Over Ranjan Pai's $300 Million Conversion Proposal
Byju Raveendran, chief executive officer, Byjus
POSTED ON January 29, 2024 4:35 PM

Shareholders of BYJU's-owned Aakash Institute have expressed their objection to the board's approval of appointing Manipal Education and Medical Group (MEMG) chairman Ranjan Pai as the company's Chairman, The Economic Times reported.   

Blackstone and Prosus NV have conveyed to Think and Learn, the parent company of BYJU's, that the move could dilute the value of their stake in the company. Reportedly, the global investment firm Prosus NV has also sent a legal notice to Pai. 

Last week, ET reported that Pai is set to become the largest shareholder in Aakash Institute with a 40 percent stake in the company. The company's board had approved the conversion of his $300 million investment from 2023 into equity, valuing the company at approximately $700 million and thereby making it debt-free. 

With these developments, Pai, Raveendran, and Think and Learn will collectively hold 80-82 percent of Aakash, while Blackstone and Aakash promoters will retain the remaining 18 percent, a decline from the existing 30 per cent. However, the entire process of the conversion is yet to be completed.

The objection arises from the fact that the valuation of Aakash as a subsidiary is included in the shareholdings of other investors in the parent company.

Shareholders argue that the approval for the conversion was granted based on a much lower valuation of Rs 4.500 crore to Rs 4.8 crore compared to the price BYJU’S paid in 2021 to acquire Aakash, which was about $950 million. 

Further, the investors are of the view that the conversion as the proposal, if approved, will take Pai's stake in the company to 38.6- 39.6 per cent making the parent Think and Learn's shares fall to 27 per cent from 43 per cent.

BYJU's acquired Aakash Institute for $950 million in 2021, in which Pai invested nearly $200 million in the Aaksh Institute in November 2023 which helped the company to clear its debt to New York-based David Kempner.

Aakash reported a 40 percent increase in revenue to Rs 1,491 crore in FY22, with a profit of close to Rs 80 crore.

Meanwhile, BYJU’s recorded a consolidated net loss exceeding Rs 8,000 crore in FY2021-22. Despite this, its operating revenue saw a significant 120 per cent year-on-year increase, reaching Rs 5,014.6 crore during the same period. The notable improvement in the financial performance of Aakash played a major role in driving this growth.

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