Cash-strapped Byju’s seeks to raise $200 million in rights issue at a valuation of $225 million

Beleaguered edtech Byju’s is looking to raise $200 million through rights issues at a valuation of $225 million. The company last raised $250 million at a $22 billion value in 2022. The board of Think and Learn Pvt Ltd (TLPL), the parent company of Byju's, has approved a rights issue to raise $200 million from existing investors.

The proposed rights issuance by TLPL aims to fund the ongoing capital expenditure and support general corporate purposes. The rights issue enables existing shareholders to participate in Byju’s growth journey.

In a letter to shareholders, CEO Byju Raveendran said the founders of the edtech group have invested $1.1 billion into the startup in the last 18 months and seek continued support from the investors.

“This rights issue is about those who care the most about Byju's stepping up as we continue to turn the company around,” Raveendran said in the letter.

“This rights issue demonstrates the company's proactive approach to securing the necessary capital for growth and ensuring a promising future for all stakeholders. It aims to offer all existing shareholders the chance to participate in this proposed capital raise to maintain shareholding without the need to ascribe valuations,” he added.

Peak XV has offered no comment on CNBC-TV18's query on participation in the rights issue.

According to the CEO and founder, the funds raised will be exclusively utilized to clear immediate liabilities and meet operational requirements, while maintaining the current rights of Byju’s valued shareholders, the letter showed.

Raveendran further said that the company is now less than a quarter away from achieving operational profitability.

The rights issue comes as Byju’s looks to secure capital amid a grave funding crunch.

The edtech unicorn finally filed its FY22 financials on January 23, after a delay of almost 22 months after the reporting period ended.

In a filing with the Ministry of Corporate Affairs, the company said it clocked a 2.18x increase in revenue from ₹2,428 crore in FY21 to ₹5,298 crore in FY22. Losses ballooned 1.8x from ₹4,564 crore in FY21 to ₹8,245 crore in FY22. This translates into an EBITDA loss of ₹4,599 crore in FY22 from ₹8,370 crore in FY21. Expenses went up 2x from ₹7,027 crore in FY21 to ₹13,668 crore in FY22.

The company has said that WhiteHat Junior (WHJ) and Tangible Play (OSMO) dragged its overall performance “significantly”. White Hat Junior continues to bleed, it saw an EBITDA loss of ₹2,877 crore in FY22 and Tangible Play (OSMO) reported losses of ₹924 crore in FY22.

Aakash & Great Learning continue to buoy the group’s revenue, Akash clocked a turnover of ₹1,248 in FY22 and Great Learning has reported a revenue of ₹221 crore in FY22. Akash continues to stay in the black with a PAT of ₹90 crore in FY22.

The company, once valued at $22 billion, has been locked in a legal dispute with creditors over the missed payment.

Last week, lenders filed an insolvency petition against holding company Alpha following a payment default on a $1.2 billion loan.

“The validity of lenders’ actions, including acceleration of the term loan, is pending and under challenge in several proceedings, including before the New York Supreme Court. Hence, any proceedings by lenders before NCLT are premature and baseless,” Byju’s said in an emailed response.

The startup has also suffered a series of valuation markdowns with the most recent from global investment management firm BlackRock. The VC which holds less than 1% stake in Byju’s, had cut down the edtech company's valuation to $1 billion from the high of $22 billion it fetched in early 2022 on January 12.

In November 2023, Prosus had downsized the valuation of the edtech giant to below $3 billion, the Dutch investor revealed in its earnings call. Prosus, which owns a 9.6% stake in the company, has been marking down the valuation of the edtech since the beginning of 2023.

At present, the company's board consists of Raveendran himself, his co-founder and wife Divya Gokulnath, and his brother Riju Ravindran, following the departure of other members last year.

In July last year, Prosus’ representative on Byju’s board, Russell Dreisenstock, also stepped down from the edtech company, along with GV Ravishankar of Peak XV and Vivian Wu of Chan Zuckerberg Initiative. The representatives had cited poor reporting and governance structures as reasons behind their exits from the board.

In June, Deloitte also stepped down as Byju’s auditor, citing delay in its FY22 financials as the reason. Byju's had to appoint BDO MSKA associates as auditors to strengthen “governance”.

In a bid to achieve profitability, the company in September 2023 undertook an exercise to reduce the workforce by about 3,500 and end duplication in roles across the organisation. The current job cuts will impact staffers at manager, manager and vertical leaders’ levels.

Byju’s has previously taken a number of cost-cutting initiatives, particularly on the employee front. Since late 2022, the edtech giant has let go of more than 2,500 employees. The most recent job cuts came in June this year when it laid off 500-1000 employees. The company’s headcount has come down from 50,000 in December 2022 to 37,000 at present.

The move came after BYJU’S announced Arjun Mohan BYJU’S new India CEO on September 20, who has been tasked with completing the restructuring process to steer a revamped and sustainable operation ahead. The edtech major has set the target to become profitable by March 2024 on account of consolidation and restructuring of the organisation and settlement of a $1.2 billion loan.