According to sources, the edtech behemoth Byju’s is in talks with American private equity firm TPG to raise another $250-300 million, just three weeks after announcing plans to lay off 2,500 employees and a fortnight after raising $250 million from Qatar Investment Authority and others. Bloomberg reports that the company is considering an IPO for its subsidiary Aakash Educational Services in 2023.
Byju’s, an Indian edtech behemoth, announced on Monday that it has secured $250 million in new funding from previous backers as it attempts to navigate the market downturn that has forced it to delay its IPO and lay off thousands of employees.
According to a recent source close to the situation, the new funding valued the Bengaluru-based startup at $22 billion, the same amount it raised in a financing round earlier this year.
Qatar Investment Authority, Qatar’s sovereign fund, participated in the round, according to the company. The company also did not respond to questions about the valuation. There was no mention of new backers. Byju Raveendran, founder and CEO of Byju’s, previously told TechCrunch that the company was in contact with current sovereign funds to put together a new round.
To strengthen its finances and achieve profitability by the end of the current fiscal year, Byju planned to eliminate 5% of its workforce, or approximately 2,500 roles, across multiple departments, as well as cut its marketing budget.
Byju’s has recently expanded its catalog to accommodate all enrolled students, in addition to preparing students for undergraduate and graduate-level coursework. Tutors on Byju’s app use everyday items like pizza and cake to explain difficult concepts. According to the startup, over 150 million students use its services.
According to a recent filing by Prosus Ventures, Byju’s backer, the Indian firm has invested more than $2.5 billion in startups over the last two years as it seeks to grow and diversify its offerings in a number of international markets.
The startup announced plans to go a public via the SPAC route earlier this year, with a valuation of more than $40 billion. Those discussions, however, did not result in a deal because a sharp drop in global stock markets erased a large portion of the gains made during the 13-year bull market.
“Byju’s is now at that the sweet spot of its growth story where both unit economics and economies of scale are in its favor,” says Raveendran.
“This means that the money we’re investing now will result in profitable growth and long-term social impact.” Despite an unfavorable macroeconomic environment, revenue, growth, and profitability are expected to be at their highest in 2022-23. Our prestigious investors’ ongoing encouragement confirms the impact we’ve already had and validates our path to profitability.
In recent months, Byju’s has taken steps to pay off its debts and other outstanding balances. According to an earlier TechCrunch report, it recently paid Blackstone $234 million for the $1 billion purchase of Aakash, clearing all outstanding debts.
During the fiscal year that ended in March of this year, it earned $1.258 billion in gross revenue (unaudited). The startup made $570 million in revenue between April and July. Byju’s has received nearly $6 billion in funding to date from investors including Prosus Ventures, Chan Zuckerberg Initiative, Sequoia Capital India, Silver Lake, Owl Ventures, UBS, and Blackrock.
The new funding comes at a time when dealflow activity in the South Asian market has decreased significantly as investors become hesitant to write new checks and evaluate their underwriting models as a result of the decline in publicly traded company valuations. According to Tracxn, Indian startups raised $3 billion in the three months ending September, a 57% decrease from the previous quarter and an 80% decrease from the previous year.
“Aakash,” a subsidiary of Byju’s, borrowed $300 million-
Byju’s, an education company, may face additional challenges. To fund its operations, the company borrows money from its affiliates. In contrast, the Keralan minister has begun to criticize the company’s methods. In order to expand quickly, the company had adopted an aggressive expansion strategy. Protests have been held in response to recent company actions such as office closures and layoffs. Employees of the company appear to be strict about repayment.
The $300 billion unsecured loan will be used for “main business activities,” according to Byju’s, the world’s most valuable edtech company. Aakash Educational Services also stated in its almost recent filing with Ministry of Corporate Affairs that it is also offering Think & Learn, the company that owns Byju’s, which is a 300 crore rupee unsecured loan, subject to approval.
The maximum loan amount will also not exceed three hundred million Indian rupees, according to the announcement, and the company’s executive board “has extended its current consent for renewing an unsecured loan to also Think & Learn for an approx amount not exceeding 300 crores.” They approved it at their meeting on October 3rd. The loan, according to Byju’s, is an advance on marketing initiatives and campaigns that Byju’s has been running for Aakash.
Marketing remuneration
“Aakash Educational Services Ltd.’s 300 crore loan is a significant advance on the marketing projects and campaigns that BYJU’S has been running for Aakash.” BYJU’S buys media conundrums in bulk for all of its group companies to take advantage of economies of scale. Byju’s observation was that this strategy produced outstanding results for both groups and Aakash.
Since BYJU acquired Aakash, it has grown by more than 100%. Lending money for purposes other than the parent company’s “principal business activity” is prohibited for both the parent company and its subsidiaries. The business activity at issue was stated to be marketing for the group’s primary line of business, for which the group had already paid and is now being reimbursed.
According to the spokesperson, Byju’s had approximately Rs 9,800 crore in its bank as of October 27, and the company is not experiencing financial difficulties. Aakash refuses to comment when asked about it. The news was first reported by The Morning Context, an online news source.
Due to the prolonged funding freeze that the edtech sector is currently experiencing, Byju has decided to use an unsecured loan from its wholly-owned subsidiary for business purposes. Byju’s announced earlier this month that it had raised $250 million from its existing investors in a rights issue valued at $22 billion.
Earlier this month, Byju’s announced that it would lay off 2,500 employees in order to become profitable by March 2023. 50,000 workers, or 5% of Byju’s workforce, would be let go. Byju’s net loss increased to approx 4588.75 crores for the fiscal year ending 31 March 2021, up from a comprehensive loss of 231.69 crores in the previous fiscal year.
There have been numerous rumors about the company’s office closing.
However, the company’s plan to cut costs by closing the office appears to have backfired. This was raised by a Kerala government representative. The company is allegedly closing offices across the state and pressuring employees to resign, according to the minister.
On Facebook, the minister claimed to have spoken with several staff members. All other headquarters, with the exception of the Kochi office in Kerala, have been closed, according to company sources. According to media reports, the company is considering additional layoffs.
According to media reports, the company has made working conditions more difficult by reducing the time it takes the sales team to meet the target from 14 weeks to 8 weeks. Furthermore, instead of two weekly holidays, there is now only one. These factors are inciting workers’ rage, prompting them to formulate demands.
Losses increased 17 times in 2020-21.
After a year of anticipation, Byju’s audit notice arrived in September of this year. According to the study, this company’s loss has grown 17 times to Rs 4500 crore. The previous year’s loss was Rs 262 crore. This loss was incurred on revenue of Rs. 2428 crore.
According to Moneycontrol, the company turned down funding from new investors with valuations ranging from $11 to $12 billion, preferring to accept its current $22 billion valuation. After Byju’s announced last week that it would seek approximately $250 million from its current investors at the same valuation, the valuation curve appears to have flattened. Byju’s valuation has risen from under $10 billion to $22 billion in the last two years as a result of the coronavirus outbreak.
In FY21, the first year of the pandemic when edtech businesses benefited from the shift to online learning, revenue did not increase. The unexpected revenue drop was attributed to changes in Byju’s revenue recognition practices. However, the company’s losses grew to Rs 4,588 crore in FY21, making it India’s largest startup with losses.
Byju’s is in talks with sovereign wealth funds in Abu Dhabi to raise $600 million.
According to sources, Byju’s plans to raise $500-600 million from existing investors and Abu Dhabi’s sovereign wealth funds due to a funding freeze for startups. By March of next year, the edtech leader hopes to be profitable. “Byju’s worth has not changed. The new fundraising campaign, according to a source familiar with the situation, is still ongoing. Any new valuation would be decided in the future because it is extremely difficult for investors to do so in this environment.
Requests for information on Byju’s fundraising plans were not returned. Previously, the company had raised $250 million from existing investors and the Qatar Investment Authority (QIA). The valuation of the company had remained constant at $22 billion. The company’s founder and CEO, Byju Raveendran, contributed half of the $800 million raised in a March funding round.
Those familiar with the situation said Raveendran was attempting to secure a $400 million loan from a variety of national and international banks to cover half of the $800 million funding round.
The Bengaluru-based company recently announced plans to lay off nearly 2,500 employees, or 5% of its workforce, as part of an “optimisation” drive.
The edtech company lost Rs 4,588 crore in 2020-21 (FY21), which is 19 times more than the previous year, according to its most recent financial report. In FY21, the company earned Rs 2,428 crore in revenue. In FY20, it had adjusted revenue of Rs 2,511 crore and an adjusted loss of Rs 300 crore.
Raveendran previously stated that the company was in a good position for its growth story due to unit economics and economies of scale. As a result, he added, the capital invested in the company’s operations would result in both profitable growth and long-term social impact. The company has now begun the journey toward group-level profitability by March of next year, using a three-pronged strategy.
Meritnation, TutorVista, Scholar, and HashLearn have been integrated into the India business unit. Aakash and Great Learning, two other acquisitions, would function independently. The company is realigning its marketing budget in order to expand its global presence.
Furthermore, over the next six months, the company intends to add 10,000 teachers to its current staff of 20,000. In addition to hiring senior management, the company is expanding its teams to further strengthen operations.
According to the company, it has already begun to reorient its priorities toward profitable growth. The company’s revenue in FY22 was close to Rs 10,000 crore ($1.3 billion), or $2 billion, according to the report.
edited and proofread by nikita sharma
