Byju’s, the Bengaluru-based edtech giant, which has been in all sorts of troubles off late, is now reportedly willing to accept a valuation of as low as $2 billion as it pursues new fundraise, reports TechCrunch. The company, which was once valued at $22 billion, is looking to raise $100Mn to $200Mn through a rights issue. Byju Raveendran, the CEO and co-founder, is expected to invest in the new funding.
This marks a drastic shift in fortune for Byju’s, once touted as the epitome of Indian startup ecosystem. The edtech firm spent over $2.5 billion in 2021 and 2022, acquiring several companies globally. However, its valuation had soared to as high as $50 billion at one time, a figure that now appears to be dramatically reduced. Valuations for private companies though, are always questionable since they aren’t determined by free floating public investments, as is the case with listed companies.
Byju’s had been seeking new funding for almost a yea now, and talks last year to raise about $1 billion were derailed after the exit of Deloitte as its auditor along with three key board members. Instead, Byju’s raised less than $150 million in that round from Davidson Kempner. BlackRock had also reduced the value of its holding in Byju’s, implying a valuation of about $1 billion.
The edtech giant was preparing to go public in early 2022 through a SPAC deal valued at up to $40 billion. However, globally worsening geopolitical and macroeconomic conditions, coupled with Byju’s own troubles (including several critical questions on corporate governance) prompted the company to postpone its IPO plans. The company has faced increasing pressure from investors to address unresolved governance issues.
Despite being backed by prominent names in the industry, including Peak XV Partners, Lightspeed, General Atlantic, Prosus NV, UBS, and the Chan Zuckerberg Initiative, Byju’s is currently grappling with challenges such as raising capital, meeting payroll obligations, and managing a debt exceeding a billion dollars. It also faces legal headwinds, specially around an alleged mismanagement of $533 Million from lenders who were part of a larger loan to the company.
Byju’s dismal financial performance for the fiscal year ending March 2022 was recently disclosed, revealing an increase in net losses, reaching ₹8,245 crore from ₹4,564 crore in the previous year. This adds more urgency to Byju’s efforts to secure funding and stabilise operations. The company is now seeking fresh funds at a steep discount of over 90% from its previous valuation to address its financial woes.
Nitin Golani, Byju’s India Chief Financial Officer, highlighted the challenges posed by underperforming businesses like Whitehat Jr. and Osmo, contributing to 45% of the losses. Golani explained that efforts were underway to scale down these businesses in subsequent years to curb losses while maintaining growth in other areas.
Byju’s has been mired in a prolonged dispute with lenders since June, ceasing interest payments on loans and engaging in negotiations for repayments. WhiteHat Jr., acquired for $300 million in 2020, played a huge role in FY22 losses, recording a pre-tax loss of ₹2,877 crore.
Byju’s is also focusing on rebuilding its core business and plans to focus on generative artificial intelligence for hyper-personalised learning after the share sale. It remains to be seen if this can come to fruition.