Education and healthcare billionaire Ranjan Pai has purchased US private equity fund Davidson Kempner’s stake in Aakash Institute, marking his entry as a white knight investor in Byju’s troubled edtech subsidiary. Pai’s acquisition of Davidson’s debt instruments is valued at Rs 1,400 crore, releasing the fund’s 27% stake in Aakash as collateral. Additionally, he is in discussions to acquire Aakash’s minority shareholders, including the Chaudhry family and US private equity fund Blackstone, which could raise his stake in the test prep unit to 35%. Pai will have two seats on Aakash’s board, with the authority to appoint its chairman.

Meanwhile, Byju’s encountered a setback as a US court ruled in favor of its lenders, validating their decision to replace Riju Raveendran, brother of Byju’s founder Byju Raveendran, as the sole director and officer of the company’s American subsidiary, Alpha. This ruling grants control of Alpha to the lenders, who provided a $1.2 billion loan. Byju’s had entered into a financing agreement with Davidson for $250 million, but only $100 million was released, and the remaining balance was withheld due to Byju’s failure to meet certain loan covenants related to Aakash. With Pai’s purchase of Davidson’s debt investment, the dispute between Byju’s and Davidson is resolved. This deal also marks Pai’s entry into Aakash, although his proprietary fund Aarin Capital was previously the first institutional investor in Byju’s.

Sources indicate that Blackstone, currently holding a 12% stake in Aakash, will exit the test prep unit by selling its shares to Pai and other investors. The Chaudhry family’s share in Aakash will decrease from 18% to 8.5%, while Byju’s holding company, Think and Learn, will increase its stake in the test prep unit from 43% to 51%. The US court’s ruling on November 2 cited instances of default by Byju’s as grounds for its decision, highlighting the WhiteHat guarantee default and WhiteHat’s failure to act as a guarantor.