Education technology startup Think and Learn Pvt Ltd, which operates under BYJU’S brand name, has sent a notice to the founders of Aakash Educational Services for their alleged refusal to complete a share swap that was unconditionally agreed as part of the sale of Aakash Educational Services Ltd (AESL).
In 2021, BYJU’S paid almost USD 940 million in cash and stock for the 33-year-old brick-and-mortar coaching centre AESL. Following the transaction, TLPL owned 43% of the company, with Byju Raveendran owning the remaining 27%.
Founder Chaudhry’s family owns around 18% of AESL, with Blackstone owning the remaining 12%.
Because it was more tax efficient for selling Chaudhrys, the arrangement called for AESL to merge with TLPL.
However, due to delays in the proposed merger by the National Company Law Tribunal (NCLT), TLPL has invoked the unconditional fallback agreement and issued a notification to Chaudhrys asking swap deal’s execution.
However, according to three sources familiar with the situation, the minority shareholders have refused to swap their equity holding in AESL with the firm’s parent TLPL.
Around 70% of the 2021 acquisition was completed in cash, with the remainder to be adjusted against the TLPL’s equity.
In recent weeks, Blackstone and the Chaudhry family have written to Byju, declining to comply with a TLPL notice delivered in March to execute the share swap in accordance with the original agreement.
After fulfilling the existing share swap commitment, the Chaudhry family’s stake in TLPL would be somewhat less than 1%.
According to sources, Chaudhrys may face tax demand, including GST, as a result of the swap transaction, and Chaudhrys are considering a cash settlement rather than a swap.
Byju’s declined to comment on the development, and AESL did not respond to a request for comment.
The share swap was a requirement of the acquisition agreement. The intention was to effect the share swap through a merger of AESL and TLPL, allowing the seller, Chaudhrys, to benefit from increased tax efficiency.
Aakash intends to close the fiscal year 2023 with Rs 3,000 crore in revenue, representing a three-fold growth since its acquisition by Byju’s.
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