Who's the Boss? Ranjan Pai Buys Majority Stake At Byju's-Owned Aakash

Ranjan Pai, Chairman of MEMG, comes to the rescue of Byju's. Pai becomes the largest stakeholder in Byju's owned Aakash Institute. How will this stake buy, convert investments into equity and making the company debt-free. Read on for all the details.

Swati Dayal
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In a big relief, Byju’s-owned Aakash Institute is all set for a significant ownership shift as Ranjan Pai, Chairman of the Manipal Education and Medical Group (MEMG), gears up to acquire a substantial 40 percent stake in the institute. Sources within Byju’s confirmed this development to TICE.

Ranjan Pai

Equity Conversion Validates $300 Million Investment

The Aakash board has granted approval for the conversion of Ranjan Pai's $300 million investment, made in 2023, into equity. This strategic move reportedly values Aakash Institute at approximately $700 million, simultaneously rendering it debt-free—a pivotal milestone for Byju Raveendran's edutech conglomerate.

Strategic Acquisition Continues to Pay Off

Think & Learn, Byju’s parent company, had acquired Aakash Institute for a whopping $950 million in 2021, marking a significant milestone in the Indian internet sector. Pai's substantial investment of nearly $200 million in November 2023 proved instrumental in helping Byju’s clear its debts and interests owed to Davidson Kempner, a US-based firm.

With the latest developments, Pai, Raveendran Byju, and Think & Learn will collectively hold an impressive 80-82 percent stake in Aakash, leaving Blackstone and Aakash promoters with the remaining 18 percent. 

Industry observers have dubbed Pai as the "white knight for Byju’s" in the face of ongoing challenges.

Antitrust Approval and Board Reshuffle

According to some reports doing rounds in the media, Ranjan Pai is expected to secure additional seats on the board of Aakash Institute upon obtaining approval from antitrust regulators—a pattern consistent with his recent investments in new-age firms. This move further solidifies Pai's influence in shaping the future direction of Aakash.

Byju’s Finally Releases Long-Awaited FY22 Financials

After a 22-month delay, Byju’s has finally unveiled its audited financial statement for the fiscal year FY22, bringing a momentary sense of relief. However, the report reveals a complex financial picture, stirring both positive and concerning sentiments for the future.

Byju's CFO Golani

Nitin Golani, Chief Financial Officer, BYJU'S said, "We would like to thank our students for the growth we have seen in FY 22. Our subscriber base has grown 125% in the year from FY 21.

While we are happy that our total income has grown 2.2X, we are also aware of our underperforming businesses like Whitehat Jr and OSMO which contribute to 45% of the losses. We have taken various measures to improve our operating financial conditions. These businesses were scaled down significantly to cut losses in the subsequent years while other businesses continue to see growth."

Revenue Surge and Core Business Strength

Think & Learn Pvt. Ltd, Byju’s parent company, witnessed a substantial surge in consolidated revenue, doubling to Rs 5,015 crore in FY22 from Rs 2,280 crore in the previous fiscal. A noteworthy 58% of the revenue, approximately Rs 2,900 crore, was generated by the core business of selling video lectures recorded on SD cards and tablets.

Aakash Is The Star Performer in Byju's Story

Aakash Educational Services reported a commendable 40% revenue growth to Rs 1,491 crore in FY22, accompanied by an 82% profit increase to Rs 79.5 crore. Great Learning, a subsidiary on sale alongside US-based Epic, demonstrated promising growth with a 1.8x revenue increase to Rs 628 crore.

Byju’s consolidated loss for FY22 skyrocketed to Rs 8,245 crore from Rs 4,564 crore in FY21, posing challenges for potential investors.

WhiteHat Jr. and Osmo: The Double-Edged Acquisitions

Acquired in 2020 and 2019 for $300 million and $120 million, WhiteHat Jr. and Osmo have proven to be a financial burden. Together, they contributed to 45% of Byju’s losses, totaling around Rs 3,800 crores. While WhiteHat Jr. experienced a 10% decline in revenue to Rs 295 crore, Osmo's revenue dropped 8% to Rs 553 crore in FY22.

Cost-Cutting Measures and Future Outlook

Acknowledging the financial strain, Byju’s has implemented significant cost-cutting measures over the past two years, including workforce reductions and the integration of WhiteHat Jr.'s assets into other business verticals. Despite losses, the company expects a notable decrease in these entities' financial setbacks.

Byju’s Ongoing Challenges With Valuation Markdowns

Byju’s, grappling with financial challenges, is reportedly contemplating a rights issue with a valuation ranging between $500 million to $1 billion. Recent markdowns by investors BlackRock and Prosus signal a significant drop from its peak valuation of $22 billion three years ago.

Byju’s consolidated loss for FY22 was Rs 8,245 crore on operating revenue of Rs 5,014 crore. Audited financials for FY23 are pending.

Auditor’s Confidence Amidst Challenges

While the auditor has issued an “unqualified opinion”, signifying no red flags in accounting practices, the cautionary note from the auditor warning of "material uncertainty" and expressing doubts about its ability to continue as a going concern adds a layer of complexity to the fundraising efforts.  

“Due to, continuing net losses from operations and accumulated losses, in addition to, the uncertainty related to the outcome of the litigation and its financial impact thereon, in respect of the $1.2 billion Term Loan B facility availed by Byju’s Alpha Inc., a step-down subsidiary, where the Think and Learn has issued a guarantee. These events and conditions, indicate that a material uncertainty exists that may cast significant doubt on Company’s ability to continue as a going concern,” auditors observed.  

Byju’s journey continues to be marked by strategic financial maneuvers and stakeholder realignments, with the latest development seeing Ranjan Pai poised as the driving force behind Aakash Institute's future trajectory. The edutech giant faces challenges, but with its leadership's confidence and ongoing strategic initiatives, the company is determined to navigate through the complexities of the market.

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