Mint Explainer: Aakash’s AOA Hatred – Trolls vs Blackstone and Control Struggle

The conflict centers around proposed amendments to the Aakash Association (AOA) that were tabled during an Extraordinary General Meeting (EGM) last year. The minority shareholders have taken the matter to the National Company Tribunal (NCLT), alleging that the changes are aimed at diluting their stakes and eroding governance rights.

As tensions mount, Blackstone and other minority investors reject Manipal Group’s claims that AOA restrictions impede operations, arguing instead that the proposed amendments unfairly undermine its rights and influence.

It claimed that the outcome of the legal battle will shape Aakash’s governance, liquidity and ability to raise future funds as the company copes with increasing financial pressure.. While Aakash believes amending the AOA is critical to securing new capital, a handful of stakeholders worry it will reduce their control and ability to exit.

For Blackstone, the stakes are equally high: Any amendment could significantly reduce the value of its investment and limit its impact on Aakash’s strategic direction.

Mint Breaking down development.

What drives the dispute?

The origins of the dispute date back to BYJU’s 2021 acquisition of Aakash in a $950 million deal structured as 70% cash and 30% equity. As part of the agreement, BYJU is issuing shares of its parent company, please think and learn PVT. Ltd., to the Chaudhary family and Blackstone in exchange for their shares.

However, disagreements over BYJU’s valuation led to delays, with payments through June 2022 stalled. This incomplete share exchange left ownership claims unresolved, while Byju’s founder Byju Raveendran claimed in October 2023 that he did not own 60% of Aakash. The Chaudhary family disputes this, with 11%, and Blackstone claims a 7% stake.

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Complicating matters is Aakash’s AOA, which was constructed during the acquisition. These provisions give a small number of stakeholders rights over key decisions, such as changes to governance, fundraising and mergers. Blackstone and the Chaudhary family argued that the AOA protected their interests, while the Manipal Group argued that the provisions were invalid due to the collapse of the acquisition and the termination of related agreements.

Adding to the complexity, Ranjan Pai’s Manipal Group now holds 40% of Aakash after the non-convertible debentures (NCDs) were converted into equity in January 2024. Pai purchased NCDS in April 2023, but when Aakash defaulted, he received payment from the payment. Davidson Kempner ₹$140 billion deal.

What will Blackstone lose if the AOA is revised?

Blackstone opposed Aakash’s efforts to amend its AOA, arguing that the changes would erode the rights of minority shareholders.

Ketan Mukhija, senior partner at Burgeon Law, said: “Blackstone is already subject to an injunction preventing it from exiting Aakash and could suffer a further loss of governance rights if the amendment goes ahead.”

In the NCLT proceedings, Blackstone highlighted that under Section 121 of the AOA, Aakash cannot act on any “reserved matter” without the prior written consent of the minority shareholders. These reserved matters include changes to the capital structure, approval of the merger, sale of substantial assets and modification of shares, and modification of shares of Blackstone.

“If the proposed amendments are allowed, Blackstone’s holding would be significantly reduced from its existing 6.97% if Manipal Group invested in Aakash.”

On what grounds are Manipal Group and Aakash pushing for correction?

Manipal Group and Aakash believe that the provisions of the AOA with Byju’s failed 2021 acquisition are no longer valid.

In June 2023, when the merger collapsed, Blackstone terminated the accompanying Merger Framework Agreement (MFA) and Implementation Framework Agreement (IFA). The agreements outline the terms of the merger, including governance rights and operational transition.

“The rights issued from there are also terminated. Clause 17.2 (which is the rescue clause) does not include clause 137 of Schedule 8 – AESL LOD I vol I (rights to deal with reserved matters in the MFA).” Mint.

The filing further argued that since the savings clause excluded Schedule 8, those rights were excluded and ceased to exist upon termination of the agreement. “Essentially, Aakash believed that because the MFA did not materialize, minority shareholders would not have substantive rights,” Gandhi said.

Additionally, Aakash claims that Blackstone lost its rights by agreeing to the NCD deal in April 2023 when Ranjan Pai initially invested.

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“The EGM resolution, which unanimously approved the issuance and conversion of NCDs, also authorizes the Board to address the terms and restrictive basis on which NCDs may be issued. It also authorizes the Board to execute the document and take all other necessary steps without seeking further consent or approval.”

What’s next?

Manipal has so far been unable to substantiate its claims in court.

“The position remains unchanged, that is, the court continues to recognize Blackstone’s rights to Manipal. Manipal has been unable to succeed in the court.” Mint.

As the dispute unfolds, its resolution will shape not only Aakash’s control and governance, but also the company’s liquidity and ability to raise future capital, directly impacting its operational stability.

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“The failure of the merger with Think & Learn brings the rights relating to the agreement under judicial review. The courts will ultimately decide its validity and meaning,” said Burgeon Law’s Mukhija.

NCLT has scheduled the next hearing for March 4.