Byju’s has closed a financing round of $250 million from its existing investors, including Qatar Investment Authority (QIA), which led the round with over $100 million, people aware of the details told ET.
It includes the sale of secondary shares by existing investors of the edtech firm, they said.
The primary fundraise was executed at its previous valuation of $22 billion while the secondary stake sale took place at a discounted price, said sources in the know. The deal, however, involves special liquidation preferences that have been handed out to these investors, making it different from a pure-play equity funding round.
Liquidation preference gives preferred shareholders the right to get their money back before other common shareholders in a sale or exit.
Two people in the know said other existing investors including Tiger Global and Sequoia Capital also pumped capital into India’s most valued privately-held startup.
Byju’s did not disclose the names of the investors and the valuation at which the round was raised. Tiger Global and Sequoia did not comment on ET’s query on the development. Emailed queries sent to Raveendran did not elicit a response till press time.
Byju’s has used the capital to pay off pending dues to global private investment firm Blackstone incurred during its $950 million acquisition of Aakash Institute in April 2021, people in the know said.
In talks to raise $500 million more
ET had reported earlier on September 24 that Byju’s paid $234 million to Blackstone after a three-month delay from the original repayment timeline.
The Bengaluru-headquartered company, which continues to face overall scrutiny of its financials and business model, is in talks to raise $500 million more through convertible notes from new and existing investors as a part of its pre-IPO funding, according to people aware of the matter. The pricing discount for these investors will be applicable when Byju’s goes for an IPO.
A convertible note is a form of short-term debt that converts into equity, typically during a future financing round, or an IPO. It requires no valuation to be ascribed to a startup immediately, something that Byju’s and other highly valued tech firms are opting for to avoid a cut in their value.
“The investors participating in the convertible notes round are expected to snag a 20% discount on the company’s share price and every six months that discount will keeping going up,” said one of the people aware of the developments, notingthat this will help Byju’s keep its valuation intact till the time that it lists.
The company was last valued at $22 billion, post its $800 million fundraise in March, this year.
In recent months, the global technology funding graph has nosedived across private and public markets in response to macroeconomic headwinds and geopolitical volatility world over. ET reported on October 12 that late-stage startups are tapping alternative funding routes such as convertible notes amid softening of valuations. This is helping players like Byju’s to preserve their rich valuations till the time the market sentiment improves.
Byju’s joins the likes of business-to-business (B2B) ecommerce platform Udaan, which is also in advanced talks to close afresh round of debt fi nancing of $150-200 million through convertible notes.
Online pharmacy marketplace PharmEasy, which recently scrapped its plans to go public, is also looking to raise about$100 million through convertible notes, people in the know told ET.
Profi tability in focus
For Byju’s, the latest round comes as it is looking to cut costs and turn profi table at a group-level by March 2023, thecompany said in a statement on Monday.
“Byju’s is now at that sweet spot of its growth story where the unit economics and the economies of scale both are in itsfavour… This means the capital that we now invest in our business will result in profi table growth and create sustainablesocial impact. Regardless of the adverse macroeconomic conditions, 2022-23 is set to be our best year in terms of revenue,growth and profi tability,” Raveendran stated.
Last week, Byju’s announced it was laying off 2,500 employees in a move aimed at pruning expenses.
The edtech fi rm reported massive losses of Rs 4,588 crore for the fi scal year 2020-2021, up from just Rs 262 crore in theprevious fi scal year.
Its readjusted revenue from operations stood at Rs 2,280 crore, a signifi cant drop of 48% from the projected revenue ofabout Rs 4,400 crore cited in the unaudited results of Think & Learn Pvt Ltd., the parent company which operates theByju’s brand.
It reported its FY21 results after 18 months of delay, in September, after receiving the necessary go-ahead from its auditfi rm Deloitte Haskins & Sells.
The fi rm also had to change its accounting practices before posting its results, with major changes around revenuerecognition for each fi nancial year.
On Monday, the edtech company reiterated that it is consolidating all its kindergarten to grade 10 (K-10) Indiasubsidiaries, which includes Toppr, Meritnation, TutorVista, Scholar, and HashLearn, into one unit to leverage theirsynergies.
The company will leave out off line coaching chain Aakash Education and upskilling platform Great Learning, out of thisarrangement, with both entities continuing to operate as stand-alone independent units.
The company is also expected to retarget its marketing budget towards its overseas markets, it said. The group is alsoincreasing the strength of its inside sales team for more eff icient and eff ective consumer-centric lead conversions toincrease top line.
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