Byju’s In Talks To Raise Over $500 Million From TPG, SWFs: Report

Byju’s In Talks To Raise Over $500 Million From TPG, SWFs: Report

HIGHLIGHTS

• TPG and two Middle-Eastern sovereign wealth funds have commenced due diligence on BYJU’S as part of the fundraiser.
• The edtech company is trying to raise money at its $222 billion value; discussions are still taking place, but it’s unclear if the deal will go through.
• BYJU’S, which has been drowning in debt, was previously said to be trying to renegotiate its $1.2 Bn term loan.

Byju’s, the top edtech business in India, is negotiating to raise more than $500 million in a fresh investment round from sovereign wealth funds and global private equity firm TPG (SWFs). This new development comes after Byju’s recently raised $400 million in a funding round that was co-led by private equity company General Atlantic and the Canadian pension fund CPP Investment Board.

Although the surge in online tutoring during the pandemic petered out and the company struggled with significant losses, Byju’s is in ongoing discussions with creditors to rework an agreement overseeing a $1.2 billion debt that is in violation of covenants.

Byju’s, the most valued edtech company in the world, is currently aiming to raise more than $500 million by entering into agreements with several investors, one of which being TPG. Due to this financial injection, Byju’s may be better able to avoid going into debt in the future.

According to sources, the Indian corporation wants to keep its valuation at about $22 billion throughout the transaction. Several investment firms have begun their due diligence on the company, including TPG and two Middle Eastern sovereign wealth funds. This is true despite a global tech slowdown that has resulted in thousands of job losses, a decline in international investment activity, and a billion-dollar decline in the valuations of previously high-flying digital businesses.

According to sources, Byju’s may issue convertible notes that would convert into equity around an initial public offering. The people, who requested to remain unnamed because the information is confidential, said that although discussions about the amount and structure are still ongoing, it is uncertain whether the potential investors will proceed with a deal.

Once the epidemic’s boom in online tutoring petered out and the business faced with rising losses, Byju’s is in separate conversations with creditors to restructure an arrangement governing a $1.2 billion loan that violates covenants. Representatives for TPG and Byju declined to comment.

Byju’s stock-market debut

The Bangalore-based firm, known initially as Think & Learn Pvt., was established in 2015 but postponed its ambitions to go public in 2017 due to the fall in global stock markets. It last raised money in October at a $22 billion valuation, a few days after announcing a 5% personnel decrease.

Byju’s obtained billions of dollars in funding with the help of the Chan Zuckerberg Initiative, General Atlantic, and Tiger Global to finance a massive acquisition spree in the face of a global IT slowdown. The organisation once had 150 million subscribers and has encountered several challenges, including a lengthy delay in filing audited financial statements and a reduction in financing for the previous fiscal year.

The company’s audited financial records, which indicated significant losses for the year ending March 2021, were submitted in 2022. It has pledged to reduce its marketing and sales costs and fire 2,500 employees, or roughly 5% of its workforce, to become profitable by March.

Byju’s Raveendran, the founder and a former educator who is also a son of teachers, is currently working on that turnaround strategy and has promised a recovery this year. He has considered using his shares as collateral to raise money and increase his ownership stake in the company to as much as 40%. It has also been working on an IPO of its tutoring section, Aakash Educational Services, which is expected to raise $1 billion.

The Potential Impact of the Investment

The potential investment from TPG and SWFs is expected to fuel Byju’s growth trajectory even further. The funds would allow the company to expand its product offerings, invest in technology and infrastructure, and enter new markets.

Byju’s has already made several strategic acquisitions, including WhiteHat Jr., an online coding platform for children, and Aakash Educational Services, India’s leading test preparation company. The additional funding could also help Byju’s compete with other global edtech giants, such as China’s Yuanfudao and the US-based Duolingo.

Byju’s valuation

Byju’s was valued at $22 billion during its most recent round of funding in October. Byju’s raised billions of dollars in funding from General Atlantic and Tiger Global during the pandemic. The company, however, is facing numerous difficulties due to the global tech slowdown, including the long-delayed filing of audited financial results.

Investor interest in the company has increased due to its rapid growth trajectory and versatility in generating revenue. With a wide selection of learning materials for K–12, competitive exams, and upskilling programmes, Byju’s is presently present in over 190 countries. The corporation withheld the valuation it received in the prior round. It is currently striving to meet the anticipated deal’s valuation of $22 million.

In September 2022, the corporation made its audit report for the fiscal year 2021 public. A staggering loss of Rs 4,588 crore and an operating income of Rs 2622 crore were disclosed in the statement.

However, the pandemic-induced boom in online tutoring has slowed, with students returning to schools and traditional classrooms. The company’s losses have been mounting, and it is now in breach of covenants on a $1.2 billion loan it took in 2019. The loan is due for repayment in 2023, and the company seeks to renegotiate its creditors’ terms.

Challenges Ahead

Byju’s has been having trouble ever since last year. The firm, which employs 50,000 people, announced a 5% personnel reduction to reduce costs. Recently, Byju’s terminated 1,000 more employees from its technical and product divisions. Raveendran has previously stated that the corporation would not lay off any additional employees in October.

Raveendran was also cited by the National Council for Protection of Child Rights (NCPCR) for alleged sales team misconduct. The child rights organisation claimed, citing a media report: “The BYJU’S sales team is engaging in dishonest techniques to persuade parents to purchase their courses for their kids, according to a news report that the Commission has come across.

The news report also remarked that several consumers had complained of being taken advantage of and duped, putting their investments and futures at risk.” Despite its impressive growth, Byju’s faces several challenges as it looks to expand further. The company operates in a highly competitive industry, with other edtech players vying for market share.

Byju’s must also navigate regulatory hurdles as it expands into new markets. In addition , the company must continue to innovate and provide high-quality educational content to retain its user base. Byju’s is currently facing challenges due to the decline in demand for online tutoring after the pandemic-era boom.

The company is in talks with its creditors to renegotiate its $1.2 billion loan that breaches covenants. However, the company remains a significant player in the Indian education market, with a vast user base and plans for international expansion. It remains to be seen how the company will navigate the challenges in the post-pandemic era.

Edited by Prakriti Arora