Davidson Kempner initiates board reconstitution at Aakash: Report

US-based investment fund Davidson Kempner Capital Management has reportedly initiated reconstitution of the board of Aakash Educational Services Ltd (AESL) to improve governance. It has inducted at least four new independent and nominee directors in the test-prep subsidiary of BYJU'Sparent Think and Learn Pvt Ltd.

The Economic Times has reported that the new board is expected to take charge within a fortnight, with the founder and CEO Byju Raveendran being the sole executive representative of the parent on the AESL board. 

Davidson Kempner has inducted two nominees of Think and Learn, Ajay Khanna and Ambika Khanna, as independent directors. The investment fund has also approached Shailesh Haribhakti and Nikhil Naik, for independent directorship, but they are yet to finalise their decision, the report said.

"The AESL board is being strengthened with three Think and Learn (BYJU'S) nominees and two independent directors," a BYJU'S spokesperson said in response to YourStory's queries.

YourStory has reached out to Davidson Kempner for comments.

Ajay Khanna is the founding CEO of the India Brand Equity Foundation. Ambika Khanna serves as the principal advisor at the US-India Business Council. Haribhakti is a veteran chartered accountant associated with companies such as Torrent Pharmaceuticals and L&T Finance Holdings, while Naik is a non-executive director at Finolex Cables and Matix Fertilisers and Chemicals.

This development comes a few days after The Morning Context reported that Davidson Kempner has levelled allegations of financial misconduct against BYJU'S and taken control over Aakash and its accounts.

In May, the Bengaluru-based firm had raised $250 million (~Rs 2,000 crore) at a flat valuation of $22 billion through structured instruments from Davidson Kempner against its Aakash shareholding. Raveendran is said to have offered a portion of his 27% equity in Aakash as collateral for the loan. Davidson Kempner has reportedly declared the loan to be in default.

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In 2021, BYJU’S acquired Aakash for approximately $950 million, with around 70% of the deal paid in cash and the remaining portion meant to be adjusted against Think and Learn's equity. 

AESL’s minority stakeholders, private equity firm Blackstone Group, and the Chaudhry family have reportedly declined to exchange their equity holdings in the test preparation subsidiary unit for shares in BYJU'S parent company, Think & Learn Pvt Ltd.

Collectively, the Chaudhry family and Blackstone hold a 30% stake in AESL, while Think & Learn owns 43%, and its founder, Byju Raveendran, owns 27%.

Blackstone and the Chaudhry family hold the right to nominate three representatives on the board, and they are currently assessing their choices, according to The Economic Times report.

The new board will oversee operations, closely collaborate with Aakash’s management team for day-to-day operations, finance, and MIS, and actively scout for new auditors to complete pending financial audits for FY22 and FY23, the report noted.

YourStory has sent queries to AESL Co-founder Aakash Chaudhry. Blackstone declined to comment.

In late June, ​​Deloitte officially resigned as the statutory auditor for BYJU’S and Aakash, citing the delay in filing FY22 financial statements. BYJU’S appointed BDO (MSKA & Associates) as its new statutory auditor for the year commencing from FY22 for the next five years.

Subsequently, the edtech company said that the FY22 audit is slated to be completed by the end of September, while the FY23 audit is expected to be concluded by the end of December.

All existing non-executive directors from Think & Learn, including Raveendran’s wife Divya Gokulnath, his brother Riju Ravindran, Chief Operating Officer Mrinal Mohit, and Chief Strategy Officer Anita Kishore, have stepped down, except for Raveendran, The Economic Times reported.

In June, lawyers Amit Khansaheb and Vishruta Kaul from Shardul Amarchand Mangaldas & Co resigned as independent directors from the AESL board. In December, Aakash Chaudhry, previously on the board, also stepped down.

The situation with Aakash raises concerns for BYJU'S, as it intends to launch Aakash's IPO by mid-2024, aiming to obtain much-needed financial relief.

In June, reports emerged that BYJU'S was seeking investors to divest a portion of its stake in Aakash. The Morning Context reported that a consortium of investors, led by Manipal Healthcare Enterprises founder Ranjan Pai, is in discussions to invest an amount ranging from Rs 500 crore - 700 crore in Aakash.

The edtech unicorn has been plagued with mounting losses, layoffs, and pending loans after the pandemic-led edtech boom.

(The copy was updated to fix a typo.)