Ranjan Pai invests $168 mn in Byju’s Aakash to clear Davidson Kempner debt

Manipal Education and Medical Group chairman Ranjan Pai has invested $168 million (Rs 1,400 crore) in beleaguered edtech firm Byju’s’ test-prep subsidiary Aakash Educational Services Limited (AESL). This would help cash-strapped Byju’s repay the loan that the company raised from US-based investment firm Davidson Kempner Capital Management in May, after facing a ‘technical default’, according to people familiar with the matter.

As reported by Business Standard earlier, Pai is in discussions to invest about $350 million as equity and debt in Byju’s, according to sources.

 

“The family office of Ranjan Pai has taken over the debt exposure of Davidson Kempner in AESL,” said a person with knowledge about the development. “He is partnering with primary shareholder Byju’s and its founder Byju Raveendran in steering the tutorial chain forward.”

 

In May 2023, Bengaluru-based Byju’s signed a Rs 2,000 crore ($250 million) round from Davidson Kempner in a structured instruments deal. It was a loan and had an equity upside linked to the company’s subsidiary AESL’s public listing in the near future, according to sources. However, the firm only received about Rs 800 crore, after an alleged breach of the loan covenant was triggered by the lender. 

 

Talks to return the money started by the end of June. Byju’s and Davidson Kempner then began negotiations to settle their dispute.

 

Also, the legal battle between Byju’s and lenders in the US on the edtech firm’s $1.2-billion term loan B (TLB), along with the company skipping an interest payment of $40 million on the loan, made the other investor Davidson Kempner, “extremely concerned”, according to people familiar with the matter.

 

Byju’s is paying about Rs 1,400 crore to Davidson Kempner. Out of this, around Rs 800 crore is the loan amount and the remaining Rs 600 crore is in interest, according to sources.

 

Industry sources said that Pai of Manipal Group paid out Davidson Kempner in a bilateral debt transaction. 

 

An entity of Pai purchased all the non-convertible debentures (NCDs) of Davidson Kempner on the NSE Corporate Bond Reporting and Integrated Clearing System (CBRICS) platform.

 

Byju’s declined to comment on this development. Experts said that the loan dispute with Davidson Kempner was a corporate hangover on AESL and its settlement along with Pai’s entry marks significant milestones for Byju’s parent Think and Learn. 

 

They said this would help the firm navigate the business restructuring that the company has initiated amid a challenging macro funding environment. Byju’s is undergoing a restructuring exercise led by its recently elevated India business chief executive officer, Arjun Mohan. 

 

The company plans to lay off approximately 4,000 employees, or over 11 per cent of its workforce. 

 

Earlier this year, the firm laid off about 1,000 employees as part of an ‘optimisation’ strategy, which was followed by subsequent rounds of layoffs affecting hundreds more.

First Published: Nov 10 2023 | 5:30 PM IST