Indian Edtech Major Byju’s Raises $250 Million Through Structured Debt Issuance

Indian edtech major Byju’s has reportedly raised $250 million through structured debt issuance to Davidson Kempner Capital Management – a New York headquartered investment firm.

The company raised money through a mix of non-convertible debentures and compulsorily convertible debentures – with the upside in the latter linked to the IPO valuation of Aakash – one of Byju’s subsidiaries slated to go public.

Davidson Kempner would get an annualized fixed coupon of 12% from the investment which looks decent.

One of the sources told Economic Times that “Apart from Davidson Kempner, Byju’s was also in talks with Apollo Global management for the transaction and had also received a term sheet, but eventually decided to go ahead with the former’s offer.”

Notably, Byju’s is India’s most valued startup and raised funds at a valuation of $22 billion last year.

While the valuations of most Indian startups including food delivery app Swiggy have come down, Byju’s is said to be looking at another $700 million fundraising at valuations similar to the last year.

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Meanwhile, reports of Byju’s fundraising have come days after Indian authorities raided the company under the tough money laundering law.

Byju’s has faced a lot of controversies over the last couple of years amid reports of toxic work culture which promotes misselling.

The company has meanwhile grown to become India’s biggest edtech company through a flurry of acquisitions.

Byju’s Raised $250 Million Through Debt Issuance

Byju’s has so far raised around $6 billion from multiple companies including UBS, Sequoia Capital India, Owl Ventures, Blackrock, and Silver Lake.

It generated revenues of $1.26 billion (unaudited) in the fiscal year that ended in March 2022. However, its losses also ballooned to around $550 million amid an increase in promotions and higher employee expenses.

While Byju’s was previously looking to turn profitable in the previous fiscal year it has now pushed the deadline by a year and now expects to turn profitable only in the fiscal year 2024 which would end in March 2024.

Startups are invariably posting losses while the revenue growth for most has fallen drastically amid a slowing global economy.

SoftBank, which has invested in several Indian startups, posted a massive loss in the fiscal year ended March as valuations of its portfolio companies plummeted.

Together SoftBank Vision Fund 1 and 2 posted a loss of $32 billion in the fiscal year ended March which was 70% higher than the previous year and a new record for the Masayoshi Son-led company.

Startups Face Funding Winter and Valuation Haircuts

Also, between Vision Fund 1 and 2, SoftBank invested only $0.4 billion in the March quarter – the third consecutive quarter when the quarterly investment was below $1 billion.

During the heydays of the tech boom, it was not unusual for SoftBank to invest over $1 billion in a single company only.

However, despite the funding winter, Byju’s has managed to secure debt financing and is also reportedly looking at an equity raise.

Meanwhile, like many other companies that benefited from the lockdowns, Byju’s also saw a spike in revenues during the COVID-19 pandemic.

As consumer behavior has mostly reverted back to pre-pandemic levels, the so-called “stay-at-home” winners like Byju’s are now witnessing a slowdown in growth.

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