Bengaluru-based Edtech BYJU’s has secured a legal win in a dispute involving its subsidiary, Aakash Institute. The civil court in Bengaluru dismissed a plea filed by Byju's lenders, who contested Manipal Group chairman Ranjan Pai's acquisition of a 40 per cent stake in Aakash.  

The lenders sought to stop Pai from converting a loan, valued at around $250-$300 million, into equity in Aakash Institute. They argued that this conversion, done at a reduced valuation, negatively impacted Think and Learn Pvt Ltd, Byju's parent company. 

Last month, shareholders of the company objected to the board's approval of the appointment of Manipal Education and Medical Group (MEMG) chairman Ranjan Pai as the company's Chairman.   

Global investors such as Blackstone and Prosus NV had conveyed their concerns to Think and Learn, last week saying 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. 

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, Buju 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 arose from the fact that the valuation of Aakash as a subsidiary is included in the shareholdings of other investors in the parent company. 

Shareholders argued 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. 

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.