Cash-strapped Byju's to raise $200 mn after taking 99% valuation cut

The proposed rights issuance by Think and Learn Private Limited (TLPL) will fund capital expenditure and support general corporate purposes.

As the largest shareholders, the founders of Byju’s have personally invested more than $1.1 billion in the company in the last 18 months.

“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,” said Byju Raveendran (pictured), the company’s founder.

“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.”

If Byju’s raises $200 million, its post-money valuation will be between $230 million and $250 million, a 99 per cent drop from the $22 billion valuation the firm had in 2022, according to sources.

“This would allow every investor to participate in the fundraising process and at a much lower valuation,” said a source.

In a letter to shareholders on Monday, the founders acknowledged the company’s challenges and the tough decisions it had made.

“As we prepare to face any challenge in the future, we draw inspiration from these lines in the (poem) Invictus by William Ernest Henley, ‘In the fell clutch of circumstance.

"I have not winced nor cried aloud. Under the bludgeonings of chance. My head is bloody, but unbowed’,” said the letter, a copy of which Business Standard has seen.

The founders stressed the importance of raising capital to create a new path for strong shareholder value and prevent further value impairment.

The letter said the rights issue will allow existing shareholders to participate in the capital raise.

Byju’s said the rights issue demonstrates the company’s proactive approach to securing 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.

The development comes at a time when Ranjan Pai, chairman of Manipal Education and Medical Group, may emerge as the major shareholder in Aakash Educational Services Limited (AESL), the test-prep firm owned by Byju's, with 39 per cent stake.

Aakash’s board has approved to convert Pai's $300 million investment in 2023 into equity.

This strategy values Aakash Institute at approximately $700 million and would position it as a debt-free entity.

“Ranjan Pai is an ally and supporter of Byju’s and its first investor, that is why he may emerge as the major shareholder,” said the source cited above.

“There are now four seats for Think & Learn and two seats for Ranjan Pai in terms of shareholding.”

Pai’s seats were earlier held by US-based investment firm Davidson Kempner Capital Management.

His investment has helped Byju’s repay the loan that the company raised from Davidson Kempner.

According to the sources, TLPL and Byju Raveendran together hold about 43 per cent stake in Aakash.

Investor Blackstone holds about 10 per cent, while as the Chaudhry family, which founded the coaching firm, has about 7-8 per cent holding.

“This means Byju’s and Pai hold about 82 per cent stake in Aakash, while as Chaudhry family along with Blackstone have about 18 per cent holding,” said the source.

Head is bloody, but unbowed

At a time when firm Byju’s is facing a multitude of challenges, delays in financial reporting and legal disputes with lenders, the company founders have written a letter to the shareholders and to raise funding.

The founders told shareholders that they draw inspiration from these lines in the poem Invictus by William Ernest Henley.

In the fell clutch of circumstance, I have not winced nor cried aloud.

Under the bludgeonings of chance, My head is bloody, but unbowed,” said the Byju’s founders in a letter addressed to the shareholders, and a copy of which was reviewed by Business Standard.

The founders said that they have infused over $1.1 billion into the company over the past 18 months, as a testament to the steadfast and continuous faith in the business and its mission.