BYJU's Sends Legal Notice to Aakash Founders Over Share Swap: What's Next?

BYJU's Sends Legal Notice to Aakash Founders Over Share Swap: What's Next?
3 min read

Think and Learn Pvt Ltd (TLPL), the parent company of educational technology behemoth BYJU, has sent a legal notice to the founders of Aakash Educational Services Limited (AESL) for resisting the completion of the share exchange.

BYJU'S acquired offiline coaching institute Aakash Educational for nearly $1 billion in April 2021. As part of the deal, the Chaudhry family sold Aakash Educational Services to Think and Learn for a combination of cash and stock. The stock exchange aims to complete this transaction. According to a source familier with the matter, the two companies hope to complete the share swap through the merger of AESL and TLPL, which will allow the Chaudhry and another Aakash investor, Blackstone to save on tax payments.

BYJU'S has declined to comment on the notification sent to Aakash's founders. TLPL has, however, invoked the unconditional fallback deal and sent notification to the Chaudhrys asking the implementation of the swap transaction due to NCLT delays in the proposed merger, sources stated. The Chaudhry family's shareholding in TLPL would be just under 1% after the existing share swap effort is fulfilled. Without the merger, the share swap approval however, may force the Chaudhrys to pay a significant tax bill, including GST on this transaction.

According to sources, the founder Byju Raveendran and BYJU'S combined own 70% of Aakash, while the Chaudhry family currently owns 18% of the company. Blackstone, a PE firm, owns the remaining.

Additionally, it was mentioned that the Choudhry family and Blackstone could prefer a cash deal to a share swap because the latter would require both parties to pay up front taxes as they each own a sizeable stake in Aakash and the share transfer would likely be enforced by BYJU'S. Following its statement that Aakash would list publically by mid-2024, BYJU'S issued the notice. Given the extensive upheaval that has taken place in both BYJU'S and Aakash over the past few weeks, it is unclear what will happen to those plans.

Aakash has not published its financial statements for FY22 or FY23, similar to BYJU'S. Aakash's operational revenue decreased by 23.5% in FY21, from INR 1,214 Cr in FY20 to INR 982.7 Cr. Additionally, from INR 165.7 Cr in FY20 to INR 43.6 Cr in FY21, its profit decreased by 73.6%. Russell Dreisenstock of Prosus, Vivian Vu of the Chan Zuckerberg Initiative, and GV Ravishankar of Peak VX Partners all exited the BYJU'S board last month. Deloitte Haskins and Sells, BYJU's auditor, also announced their resignation in light of the company's failure to submit its FY22 financial accounts on time.

Whether BYJU's issues with its auditors are also the cause of the delay in Aakaash's financials remain unclear. Two independent directors of the company's coaching group, Aakash Educational Services Ltd (AESL), departed the physical coaching behemoth earlier in July 2023. Amit Khansaheb and Vishruta Kaul, two attorneys connected to Shardul Amarchand Mangaldas & Co., are said to have quit barely a few weeks after directors of BYJU'S resigned.

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