The National Company Law Court (NCLT) recently ordered a status quo on the shareholding structure of the Aakash Institute due to a legal conflict with Byju, an important player in the education technology sector in India. This development occurs in the midst of current disputes concerning property and financial agreements between the parties involved.
The decision was taken in response to the concerns raised by the Byju resolution professional (RP) concerning the potential dilution of his participation in Aakash, as reported by Bar and Banc. Singapore Topco, a shareholder supported by Blackstone with a 6.8% participation in Aakash, also opposed the proposed amendment, citing potential impacts on its rights described in a merger agreement with Byju.
The lenders of Byju, including Glas Trust, also expressed objections, stressing the importance of Aakash as a key asset for Edtech company in difficulty. Any modification of Aakash shareholding could have implications for their interests.
Aakash, on the other hand, justified the modification by declaring that it was essential to generate funds for business operations.
Manipal Systems, the current majority shareholder of Aakash, supported the proposed revisions.
Initially, the NCLT had prohibited Aakash from carrying out the amendment. However, the High Court of Karnataka intervened later and suspended this prohibition order, allowing Aakash to continue. Consequently, Singapore Topco decided to challenge the involvement of the High Court by calling on the Supreme Court. The Supreme Court then asked Aakash to temporarily stop the implementation of the amendment and to resolve the case through the national law court (NCLAT).
The judicial disputes result mainly from disagreements on the terms of the acquisition, which led to this disputed dead end. BYJU’s acquisition of the AAKASH Institute was initially considered a strategic step to strengthen its grip in the education sector by integrating the vast network of AAKASH physical coaches through India. However, unresolved disputes have thrown uncertainties on the expected synergies of the merger, highlighting the complexities that companies face in synchronization operations after the acquisition.
The NCLT decision to maintain the status quo on the participation of Aakash is an important evolution, which has a potentially impact on the strategic levels of Byju while it continues to navigate the competitive challenges posed by this evolving market landscape.
Currently, byjjs faces competition from other Edtech platforms which also seek to capture substantial market share. Rivals like Unacademy and Vedantu have strengthened their positions in industry thanks to various strategic initiatives. For example, Unacademy focused on improving its technological offers and expanding its content directory, while Vedantu innovated its learning models to attract a wider student base. These competitors actively engage in strategic expansions, which add pressure on the Ju to effectively resolve its internal legal issues and focus on maintaining its leadership on the market.
The implications of the NCLT decision are closely monitored by industry stakeholders, in particular concerning the financial situation and the strategic orientation of ByJU. The resolution of this legal dispute could play a crucial role in the training of future strategies of Byju and its ability to integrate and align new acquisitions on its existing operations. As the legal proceedings take place, investors and market analysts observe strongly, given the larger implications that this case could have in the EDTECH sector in India.
