Byju's and Davidson Kempner are in talks to settle their dispute over a loan covenant breach linked to the Indian edtech company's test preparation subsidiary, Aakash Institute.
In May 2023, Byju's raised $250 million (~Rs 2,000 crore) through structured instruments from Davidson Kempner against its shareholding in Aakash. However, Byju's breached a loan covenant in June 2023, which required it to maintain a minimum net debt to equity ratio of 1.25.
As a result, Davidson Kempner has demanded that Byju's repay the entire loan amount, along with interest. Byju's, on the other hand, has offered to repay only the amount that it has so far availed of from the loan, along with interest.
The two parties are currently in talks to reach a mutually agreeable settlement. It is unclear what the terms of the settlement will be, but it is likely that Byju's will have to pay a significant amount of money to Davidson Kempner.
The dispute between Byju's and Davidson Kempner is a sign of the financial challenges that the edtech industry is facing. The industry has been growing rapidly in recent years, but it is now facing increasing competition and regulatory scrutiny. This has led to a number of edtech companies facing financial difficulties.
The settlement between Byju's and Davidson Kempner will be a closely watched event. It will be seen as a test of the financial strength of the edtech industry and the willingness of investors to continue funding the industry.
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