Ranjan Pai’s Rescuer Role Set To Hold 40% Stake In Aakash; Meet India’s Third-Richest Man In Service Sector With A Net Worth Of Rs 23,230 Crore
Byju's is facing significant financial challenges, including a potential rights issue at a reduced valuation and marked-down valuations from key investors. Amidst this backdrop, Ranjan Pai, the chairman of Manipal Education and Medical Group (MEMG), has emerged as a white knight, taking on the role of a rescuer for Byju's. Ranjan Pai's strategic investments and active involvement position him as a key player in steering Byju's through its current struggles, particularly in the context of his influential role in Aakash Institute.
According to sources, the Aakash board has given approval for the conversion of the $300 million investment made by Ranjan Pai in 2023 into equity. This move values the company, a crucial asset for Byju Raveendran’s troubled edtech group, at approximately $700 million, making it debt-free.
Ranjan Pai, the chairman of Manipal Education and Medical Group, is poised to become the largest shareholder in Aakash Institute, owned by Byju’s, with a substantial 40% stake, as per insiders familiar with the matter.
The Aakash board’s approval for the equity conversion of the $300 million investment by Pai during 2023 has significant implications. This action not only values the company at around $700 million but also relieves it of its debts, making it a pivotal move for Byju Raveendran’s edtech group, which has faced challenges in recent times.
In a noteworthy acquisition in 2021, Byju’s parent company, Think & Learn, acquired the brick-and-mortar coaching chain Aakash Institute for a substantial $950 million. The transaction stood out as one of the largest acquisitions in the Indian internet sector.
Additional Board Seats Secured
Last October, there were reports about Pai’s intentions to contribute a more substantial amount to the offline coaching company than was initially anticipated.
Now, with this move, the Chairman of MEMG will now exert a strong influence over Aakash, considered a crown jewel, while Byju grapples with a series of crises stemming from governance lapses.
According to a source briefed on the matter, the board has given approval for the conversion, making Pai the largest shareholder. He has actively collaborated with Raveendran in addressing issues such as the Davidson Kempner debt problem, indicating that the ‘Pai factor’ will play a critical role in shaping the destinies of both Aakash and Byju’s.
In November of the previous year, Pai invested nearly $200 million in Aakash Institute to assist Byju’s in clearing its debt and interest owed to the US-based Davidson Kempner.
Raveendran, the founder of the edtech major, had also borrowed capital from Pai, using his personal stake in Aakash as collateral for daily operations at Think & Learn.
As a result of these developments, Pai, Raveendran, and Think & Learn will collectively hold 80-82% of Aakash, leaving the remaining 18% to private equity firm Blackstone and Aakash promoters, the Chaudhrys.
Described as a “white knight for Byju’s” during its struggles, Pai is set to gain additional seats on the board of Aakash after obtaining approval from the antitrust regulator for the investment.
This aligns with Pai’s recent trend of increasing his investments in new-age firms at attractive valuations, as seen in his 15% stake in the online pharmacist PharmEasy, along with three directorships.
In addition to his involvement with Aakash, Pai has also acquired stakes in IPO-bound FirstCry and omnichannel jewelry retailer BlueStone, among other ventures. These investments come on the heels of Pai partially divesting from Manipal Hospitals in a sale to the Singapore government-owned Temasek in April 2023.
Analyzing the Financial Scene
The current status of Blackstone’s and Chaudhrys’ stakes in the offline coaching company remains uncertain, as ongoing discussions and negotiations continue. The pending stock swap between these two shareholders in Think & Learn adds to the situation’s complexity.
Aakash Chaudhry, whose father JC Chaudhry founded the institute over 35 years ago, is in talks about potentially returning as the chief executive of Aakash Institute. However, final decisions are yet to be reached on this matter.
In the financial realm, Aakash Institute reported a notable 40% surge in revenue to Rs 1,491 crore in FY22, accompanied by a profit of nearly Rs 80 crore. The financial results for FY23 are still pending.
Byju’s Struggles
As reported on January 23, Byju’s is facing financial challenges, with a potential rights issue at a valuation ranging from $500 million to $1 billion.
This marks a significant decline from its peak valuation of $22 billion three years ago; while investors like BlackRock and Prosus have recently marked down Byju’s to $1 billion and $3 billion, respectively.
Dr. Ranjan Pai, India’s Third-Richest Man In Service Sector
Dr. Ranjan Pai stands out as a key figure in the context of third-generation businessmen successfully managing family business empires.
As the chairman of Manipal Education and Medical Group (MEMG), he oversees an expansive education and healthcare empire comprising seven universities and 29 hospitals.
Dr. Pai, a medical doctor and billionaire businessperson, boasts a real-time net worth of Rs 23,230 crore as of August 22, 2023, securing the 1067th position on Forbes’ World’s Richest People list.
Dr. Pai is a medical graduate from Kasturba Medical College, Manipal, and began his career as the Managing Director of the Melaka Manipal Medical College in Malaysia.
He played a critical role in restructuring the entire group to align with global business standards and taking MEMG’s Education and Healthcare businesses to remarkable heights.
Despite initial plans to continue with the family’s not-for-profit education trust, Manipal Academy of Higher Education (MAHE), Dr. Pai opted to join MEMG’s business in 2000. Under his leadership, MEMG attracted private equity capital, corporatizing the group.
The Last Bit, Byju’s Challenges and Ranjan Pai’s Rescuer Role
As Byju’s grapples with financial hurdles, including a potential rights issue at a significantly reduced valuation, and faces marked-down valuations from major investors, the situation appears challenging for the edtech giant.
With a consolidated loss of Rs 8,245 crore for FY22 and pending audited financials for FY23, Byju’s is already facing stormy waters.
However, Amidst these challenges, Ranjan Pai emerges as a crucial figure in Byju’s troubled story, assuming the role of a rescuer.
His strategic investments and active involvement in addressing issues, such as the Davidson Kempner debt problem and negotiations surrounding Aakash Institute, position him as a white knight for Byju’s during its time of struggle.
As the largest shareholder in Aakash, with additional board seats secured and a track record of successfully managing businesses, Pai’s influence will become instrumental in navigating the fate of both Aakash and Byju’s.
Ranjan Pai’s calculated moves and financial acumen will be beneficial for Byju’s, providing stability and expertise as the company endeavours to overcome its current challenges in the competitive edtech sector.
