Crisis-ridden Aakash Educational Services Ltd (AESL) envisioned its ₹250-crore rights issue as a major reset after a turbulent period marked by senior management departures and a slide into losses during the 2023 financial year. Once a reliable profit generator for its parent Byju's, the test preparation chain urgently requires new capital to stabilize its operations and finance future growth.
Legal Tussle and Leadership Flux Precede Fundraise
The board initiated the first segment of this fundraise, a ₹100-crore tranche, inviting all existing investors, including major shareholders like Think & Learn Pvt. Ltd (TLPL), Byju's parent company. While investors wired funds proportional to their holdings, AESL has now blocked the allotment of shares against TLPL's ₹25-crore contribution. The company cited potential non-compliance with the Foreign Exchange Management Act (FEMA), the Companies Act, and External Commercial Borrowings (ECB) regulations.
This development follows a protracted legal battle over Aakash's capital-raising plans. Byju's, which acquired Aakash in a $950 million deal in April 2021, along with a creditor, had challenged the rights issue. However, the National Company Law Appellate Tribunal (NCLAT) in late October and later the Supreme Court declined to grant interim relief, allowing the process to proceed.
Even as funds started flowing, the company's top leadership remained unstable. Chief Financial Officer Vipan Joshi departed on October 31, merely two months after CEO Deepak Mehrotra resigned in August. Chandra Sekhar Reddy Garisa, formerly of Ranjan Pai's family office Claypond Capital, succeeded Mehrotra as Managing Director and CEO from August 19.
Why Think & Learn's Money is in Legal Limbo
TLPL, currently undergoing a Corporate Insolvency Resolution Process (CIRP), had its resolution professional oppose the rights issue unsuccessfully across judicial forums. Despite the opposition, TLPL subscribed to its pro-rata rights by depositing ₹25 crore.
The controversy erupted when former promoter Riju Ravindran filed an application with the Bengaluru bench of the National Company Law Tribunal (NCLT). He alleged that TLPL raised this sum by issuing ₹100 crore worth of debentures under a structure that might violate FEMA, ECB guidelines, and related foreign exchange rules. The NCLT is currently examining these claims.
Although TLPL's resolution professional shared the debenture agreement with Byju's Alpha Inc. and a supporting legal opinion, Aakash's board, after reviewing multiple opinions, decided to defer the share allotment pending the NCLT's ruling. The ₹25 crore is now parked in an interest-bearing account.
A Proxy Battle for Byju's Key Assets
This impasse turns the rights issue into a proxy war for control of Byju's remaining valuable assets. Ranjan Pai's Manipal Group currently holds approximately 58% of Aakash after converting debt into equity. Meanwhile, Ronnie Screwvala's upGrad has also shown interest in certain assets of the insolvent Think & Learn, though Screwvala clarified upGrad is not targeting the K-12 segment that Aakash operates in.
Another significant shareholder is Beeaar Investco Pte. Ltd, a Singapore-based vehicle through which Byju Raveendran retains an economic interest, holding about 16% in AESL. Notably, the board has cleared Beeaar's proportional participation of roughly ₹16 crore in the rights issue, even as TLPL's funds are on hold.
Legal experts are divided on the implications. Some argue that if one shareholder is legally barred from participating, it undermines the very nature of a rights issue offered proportionally to all. Others contend that the company can proceed with allotments to other shareholders, subject to necessary approvals, without invalidating the entire issue.
With the first ₹100-crore tranche considered functionally closed, AESL may launch a second ₹140-crore rights issue. However, prudence suggests awaiting clarity from the NCLT to avoid compounding disputes and undermining confidence in the resolution process for the embattled edtech giant.
