Education tech startup Think and Learn Pvt Ltd, operating as BYJU’S, has issued a notice to Aakash Educational Services founders due to their alleged reluctance to fulfill a share swap agreed upon during the sale of Aakash Educational Services Ltd (AESL).
BYJU’S acquired AESL for approximately $940 million in a cash and stock deal in 2021. After the acquisition, TLPL owned 43% of AESL, while Byju Raveendran, the founder, held another 27%, and the Chaudhry family retained about 18%, with Blackstone owning the remaining 12%. The plan was for AESL to merge with TLPL for enhanced tax efficiency.
Delays in Proposed Merger Trigger Unconditional Fallback Agreement and Share Swap Dispute
However, delays in the proposed merger by the National Company Law Tribunal (NCLT) prompted TLPL to invoke an unconditional fallback agreement and send a notice to the Chaudhry family, urging them to execute the share swap. Despite this, the minority shareholders of AESL have declined to swap their equity with TLPL. Around 70% of the acquisition cost was paid in cash, with the remainder intended to be adjusted against TLPL’s equity. Both Blackstone and the Chaudhry family have ritten to BYJU’S rejecting TLPL’s notice to execute the share swap as per the original agreement.
Potential Tax Demands and Share Swap Dispute Impact BYJU’S Acquisition of Aakash Educational Services
Once the existing share swap obligation is fulfilled, the Chaudhry family’s stake in TLPL would be slightly below 1%. There may be potential tax demands, including on GST, arising from the swap deal, and the Chaudhry family is considering a cash payout instead of the swap. BYJU’S declined to comment on the matter, and there was no response from AESL to the query. The share swap was a crucial aspect of the acquisition agreement, with the intention of achieving tax efficiency through the merger of AESL and TLPL. Aakash Educational Services aims to close the financial year 2023 with revenue of Rs 3,000 crore, representing three-fold growth since its acquisition by BYJU’S.
