BYJU'S issues notice to Aakash founders over share swap dispute

Education technology startup Think and Learn Pvt Ltd, known as BYJU'S, has sent a notice to the founders of Aakash Educational Services Ltd (AESL) over alleged resistance to completing a share swap that was part of the 2021 acquisition deal. 

BYJU'S acquired AESL, a 33-year-old brick-and-mortar coaching center, for nearly $940 million in a cash and stock transaction. Post-acquisition, Think and Learn Pvt Ltd (TLPL) owned 43 per cent of AESL, with founder Byju Raveendran holding another 27 per cent, and the Chaudhry family maintaining approximately 18 per cent, while Blackstone held the remaining 12 per cent.

The deal had envisioned AESL merging with TLPL, as it would have been more tax-efficient for the Chaudhry family, who were the sellers. However, due to delays in the proposed merger by the National Company Law Tribunal (NCLT), TLPL has invoked the unconditional fallback agreement and sent a notice to the Chaudhry family, requesting the execution of the share swap.

Share swap with TLPL declined

According to sources, the minority shareholders, including the Chaudhry family and Blackstone, have declined to participate in the share swap with TLPL. Approximately 70 per cent of the acquisition amount was paid in cash, and the rest was intended to be adjusted against the equity of TLPL.

If the share swap is completed, the Chaudhry family's stake in TLPL would be slightly below one per cent. However, they are reportedly considering a cash payout instead of the swap, which could potentially lead to demands from tax authorities, including on Goods and Services Tax (GST).

While BYJU'S declined to comment on the situation, sources have emphasised that the share swap was a critical aspect of the acquisition agreement. The original intention was to achieve the share swap through a merger of AESL with TLPL, providing enhanced tax efficiency for the Chaudhry family.

Akash recorded 3x growth since acquisition

In response to the news, analysts note that education firm Aakash, after being acquired by BYJU'S, is expected to close the financial year 2023 with revenue of Rs 3,000 crore, marking a three-fold growth since the acquisition.

The notice and resistance from minority shareholders indicate potential challenges and complexities in completing the share swap as initially planned. The situation highlights the importance of carefully structuring acquisition deals, especially when involving multiple shareholders and tax considerations. 

As the situation unfolds, the resolution will have implications for both BYJU'S and Aakash, impacting their growth strategies and market positioning in the highly competitive education technology sector.

(With PTI inputs)