BYJU’S to raise $200mn through rights issue

BYJU’s launched a rights issue fundraise to its equity shareholders worth $200 million (about Rs 1,600 crore), at a time when the edtech platform is preferring operational sustainability over valuation.

The edtech company reported a widening loss to Rs 8,245 crore in financial year 2022, filed last week with the Ministry of Corporate Affairs but said its consolidated revenue rose 2.2 times or about 120 per cent to Rs 5,298 crore from Rs 2,428 crore in FY21. 

 The board of Think and Learn Private Limited (TLPL) launched the raising of funds to clear immediate liabilities and meet operational requirements, the company said on Monday.

Last year, the company appointed Infosys board member Mohandas Pai and former SBI MD Rajnish Kumar as advisors, in a bid to turn around operations. 

Aimed at funding the ongoing capital expenditure and supporting general corporate purposes, BYJU’s said the rights issue “enables existing shareholders to participate in its growth journey.”

Byju Raveendran, founder of BYJU’S, said, “This rights issue is about those who care the most about BYJU'S stepping up as we continue to turn the company around. Along with being a founder, I am also the largest investor in the company. The funds raised will be exclusively utilised to clear immediate liabilities and meet operational requirements, while maintaining the current rights of our valued shareholders. I am also happy to share that BYJU'S is now less than a quarter away from achieving operational profitability, reflecting the effectiveness of our strategic initiatives and the resilience of our business model.”  

Notably, BYJU’s founders Raveendran and his wife Divya Gokulnath are its largest shareholders. Amid the embattled edtech’s ongoing issues with payments to multiple stakeholders, the company said the founders have “personally” invested over $1.1 billion in the last 18 months. Amid salary payment issues, Raveendran had said he mortgaged four of his houses to keep operations running.     

Rajnish Kumar, former SBI MD and advisor for the firm told Republic Business in December that issues in the company are being fixed “one by one.”

“The first problem was their accounts. For the year 2022, their accounts are already done. They had an issue with their auditors. 2023 accounts will be most likely finalised by February. The issues around Aakash have been resolved, with Mohandas Pai coming in,” the veteran banker and BharatPe chair affirmed.

“There is a loan of $1.2 billion where they had a problem (Term Loan B), they are diversing some stake in companies. The cash burn in one of their subsidiaries has been drastically brought down. Think and Learn’s internal target is that by April (2024) they should stop burning cash.”

Recently, Arjun Mohan of upGrad was roped in as BYJU's India CEO and he has been tightening the ship, trying to let go of employees and bring the once humongous workforce under 5,000 employees, as per several reports. Kumar said the layoffs by the company, as part of Mohan’s strategy “must have been need-based.”

“Things have changed (after the coming in of Mohan), BYJU’S is more on the strategic side,” he said.

In a note addressed to shareholders, the founders spoke on the challenges faced by the company in recent months, and “tough decisions” undertaken despite the changing macro environment.  Over the last many months, strategic measures have been taken to optimise costs and become a lean organisation focused on execution, the company said, stressing on the importance of raising capital to “create a glidepath for strong shareholder value and prevent further value impairment.” 

The letter also acknowledged the role of shareholders in the company's journey, proposing that the rights issue “offers existing shareholders an equal opportunity to participate in the capital raise.”

The world's largest asset manager BlackRock cut the company's valuation to about $1 billion, down 95 per cent fom the $22 billion in the last fundraising in October 2022. Technology investment firm Prosus had in November cut the edtech company’s valuation to under $3 billion, which is a significant drop of 85 per cent from the company’s $22 billion valuation until 2022.