Manipal Group chairman Ranjan Pai in talks to invest $350 mn in Byju's

Manipal Group Chairman Ranjan Pai is in discussions to invest about $350 million as equity and debt in edtech firm Byju's, according to sources. A major portion of this investment is expected to be invested in Byju's-owned Aakash Educational Services Limited (AESL). Byju's founder and chief executive officer Byju Raveendran, who owns a 30 per cent stake in Aakash, is expected to partially offload his holding to Pai for $80-90 million. Raveendran may use the money to repay a large part of the Rs 800 crore loan that Byju's raised from US-based investment firm Davidson Kempner Capital Management in May, after facing a 'technical default', the sources said.

The capital from Pai is expected to help Byju's release the pledge on shares of Aakash, which were offered as collateral for the Davidson Kempner loan. Pai is initially investing about $120 million as debt in Byju's with a lien on the shares of Aakash, according to the sources. They said that, parallelly, Raveendran is also in talks with various private equity (PE) firms, including Bain Capital, KKR and others, to explore the potential sale of a controlling stake in Aakash.

"The investment from the private equity firms depends on Ranjan Pai's investment in Byju's and the terms and conditions," said a person familiar with the matter. "Pai is having conversations with the private equity firms to bring in the investment in Byju's."

A Byju's spokesperson said that Think and Learn Private Ltd is not considering any sale of AESL and it is core to the growth strategy of T&L.

Aakash Chaudhry, the former chief executive officer and a member of the family that established AESL, is also likely to return as the CEO of the company.

Chaudhry and his family, along with PE firm Blackstone, sold 33-year-old brick-and-mortar coaching centre AESL to Think and Learn Pvt Ltd (TLPL), the parent company of Byju's, in 2021 for nearly $1 billion in a stock-and-cash deal. Despite Byju's itself posting losses of Rs 4,588 crore in FY21, 19 times more than the preceding year, Aakash has been the best-performing acquisition of the edtech giant. Chaudhry's return is linked to a stock-swap deal with Byju's as part of this acquisition. He is expected to replace Abhishek Maheshwari who quit AESL in September.

"Chaudhry's return as CEO is a decision that all the stakeholders would take when the deal with Ranjan Pai is closed," said a person.

Pai recently sold a significant part of his stake in Manipal Health Enterprises to Singapore's sovereign wealth fund Temasek. The fund later bought an additional 41 per cent in Manipal Health for more than Rs 16,300 crore ($2 billion), taking its total shareholding to 59 per cent in one of the country's largest hospital chains.

In August, Think and Learn Pvt Ltd (TLPL) reportedly sent a legal notice to the Chaudhry family, the founders of AESL, following their alleged resistance to complete the share swap that was unconditionally agreed as part of its sale. Reasons for their reluctance to do a share swap included due diligence and corporate governance issues, Byju's inability to file its financials, legal battle with lenders, challenges in raising fresh capital, and a markdown in its valuation by investors. The share swap was an integral part of the acquisition agreement, which took place in 2021, when the Chaudhry family sold AESL to TLPL for a combination of cash and shares. The intention was to effect the share swap through the merger of AESL with TLPL, allowing for enhanced tax efficiency for the seller, the Chaudhrys, according to the PTI report, which quoted sources. However, due to delays in the proposed merger by the National Company Law Tribunal (NCLT), TLPL invoked the unconditional fallback agreement and issued a notice to the Chaudhrys, requesting the execution of the swap deal.

In September, Byju's made Arjun Mohan the CEO of its India business, replacing Mrinal Mohit as the firm battles lenders, challenges in raising fresh capital, and a markdown in its valuation. Mohan, who was once the company's chief business officer, returned to spend the last three months working with founder and group CEO Byju Raveendran. His expertise is expected to help Byju's turnaround efforts and strengthen its position in the global edtech landscape. Mohan is also leading a business restructuring exercise at the firm to simplify operating structures, reduce the cost base and better cash flow management. Byju's has decided to lay off around 4,000 employees or over 11 per cent of its total workforce over the next few weeks as part of that restructuring exercise, according to sources.

Byju's has also decided to put two of its key assets -- Epic and Great Learning -- on the block to generate $800 million to $1 billion in cash, with an aim to meet the edtech firm's various commitments, including repaying the entire $1.2 billion term loan B (TLB) within six months, according to sources.