Aakash Acquisition: BYJU’S Once Again Fails To Remit Payment to Blackstone
- ByStartupStory | September 24, 2022
BYJU’S appears to be in increasing financial problems as the edtech leader apparently missed the deadline to pay more than INR 1,500 crore in debt obligations to private equity firm Blackstone once more. The debt allegedly relates to the April 2017 acquisition of the tutoring network Aakash Educational Services for INR 7,300 Cr.
According to a source who spoke to Mint, BYJU’S committed to pay the private equity firm between INR 1,500 Cr and INR 1,620 Cr of the total amount owed to Blackstone by June 2022. Thus, all outstanding payments to Blackstone would be settled by September 23 according to the edtech major’s certified financial records for the financial year 2020–21 (FY21), which were released earlier this month.
Additionally, reports claimed that the money hadn’t yet been transferred. The payment must be made within the next ten days, according to one source, while another stated that it should happen shortly. The agreement, which was started last year, has not yet been fully completed. Aakash Choudhary, the founder of the tutoring company, received payment in July of this year, but Blackstone’s dues are apparently still unpaid because of RBI’s pricing regulations.
Byju Raveendran, a co-founder of the edtech business, recently informed a news outlet that there hasn’t been a delay, but rather that the deal is mired in a legal minefield. An Indian entity cannot give an overseas investor more than the entity’s fair market value in accordance with central bank regulations.
Additionally, he had previously stated that BYJU’S stake will be valued higher than its fair market value in the final payment to Blackstone. The edtech startup believed that a two-month delta would be sufficient to reach the FMV level, but later increased it to three months, he had also informed the portal.
Even that does not appear to have benefited BYJU’S and may cause a delay in the payment of the last instalment to Blackstone. The private equity firm is also eagerly awaiting National Company Law Tribunal (NCLT) approval of the acquisition deal, which will allow Blackstone to acquire more shares in BYJU’S worth 0.75–1%. BYJU’S has received criticism for a variety of factors. The edtech business was doomed by the delayed financials as detractors demanded greater openness and better corporate governance norms.
In addition, there are problems with the way the edtech major handles its bookkeeping. The uproar around the startups has been so intense that it has even prompted seasoned investor Shankar Sharma to criticise BYJU’S investors for supporting the company’s questionable accounting methods.
The alleged fundraises, wherein the sum promised by a few investors has not materialised, look to be complicated issues for the edtech giant. The $250 Mn that Sumeru Ventures and Oxshott Capital Partners promised, but which has been delayed for “macro-economic reasons,” has stood out. The firm has also been dogged by claims that its employees recruited students through predatory methods. Children have frequently been forced to use BYJU’S services without even considering whether the student’s parents could afford them.
The “funding winter” chill that has gripped the Indian startup scene also seems to be a major concern. The majority of the burden of the lack of liquidity has fallen on edtech businesses because investors are generally reluctant to inject funds. Startups have been compelled to postpone expansion ambitions and make cost-saving measures due to the funding winter.
The declining effects of the epidemic, however, seem to represent the biggest danger to BYJU’S. With children returning to school, online learning has suffered. Although BYJU’S expended a lot of energy on the online model, it seems that the physical and offline models are once again the dominant ones. Due to a lack of funding, edtech businesses are moving cautiously into the brand-new industry of physical tutoring facilities. Despite this, many of these firms continue to focus on the Indian education industry. An Inc42 analysis projects that by 2025, the Indian edtech market would be worth $10.4 billion.
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