If the deal goes through, 10X AD could invest between $150-200 Mn in either BYJU’S parent company Think and Learn Private Ltd or subsidiary Aakash
The edtech major has also reached out to US-based PE firm Apollo for a $200-250 Mn structured funding for Aakash
The attempts at another fundraise come amid mark down in valuations and a looming debt crisis for BYJU’S
Edtech decacorn BYJU’S is reportedly in talks with Abu Dhabi-based fund 10X AD and US-based private equity (PE) firm Apollo Global Management to raise at least $400 Mn-600 Mn.
If the deal goes through, 10X AD could invest between $150-200 Mn in either BYJU’S parent company Think and Learn Private Ltd or subsidiary Aakash Education Services. On the other hand, the edtech major has also reached out to Apollo Global for a $200-250 Mn structured funding for Aakash.
The Economic Times quoting sources said that 10X AD is mulling both options – of leading a consortium of investors and going alone. Besides, the Abu Dhabi-based fund has also sought preferred rights, pick options and guaranteed internal rate of return (IRRs) for ‘downside protection’ as part of the transaction.
While the late-stage tech-focused fund traditionally invests in the range of $30-50 Mn on its own, it is also known to loop in other investors and institutions such as ADQ to shore up the pool size. A few other small investor groups from the region can also join the transaction.
The report said that ADQ’s venture capital arm Disrupt AD is also looking at shoring up its earlier stake in the edtech major and could also join the fundraise.
On the other hand, BYJU’S has also sought capital from Apollo Global for its subsidiary Aakash. This $200-250 Mn investment could either come at a discount to the next round or through a preferred instrument with a fixed pre-agreed IRR and downside protection.
Interestingly, BYJU’S previous attempt to secure investment from Apollo Global was rejected by the PE firm.
The report, citing sources, said that the talks are still underway and the deal will not necessarily materialise.
A key concern among the investors seems to be the financial health of the company. BYJU’S financial statements for the fiscal year 2021-22 (FY22) and FY23 are yet to be approved or made public and that could put a spanner in the works for the edtech player’s funding plans.
“It’s really unprecedented – how does any investor put money if there are no baseline audited numbers?” said an investor who passed on the opportunity to invest in the edtech firm. “Alternatively, one does a deep-dive forensic and that is a three-four-month exercise,” said the same investor.
To allay these concerns, BYJU’S auditor KPMG has prepared a detailed diligence report for the prospective investors which is being used as a reference for financial performance and other latest updates.
The fundraise is likely part of CEO Byju Raveendran’s efforts to stave off a potential debt crisis, pare his 30% stake in Aakash and provide liquidity to negotiate BYJU’S $1.2 Bn Term B loan.
Another major bone of contention with regards to Aakash’s fundraise appears to be the difficulty on part of investors to ring fence their investment from the ongoing issues at the parent firm. Aakash, on its own, has been putting up healthy numbers and has nearly doubled its estimated revenue year-on-year (YoY) to $430 Mn in FY23, as per industry experts.
The parent company, on other hand, has been in doldrums and has been mired in a slew of controversies such as delayed financials, lax corporate governance norms, mounting losses and mass layoffs.
As a result, investors such as Blackstone are reportedly looking for an exit. The issue of ring fencing is also said to have weighed heavily on BYJU’S recent bid to raise capital for Aakash, which eventually saw TPG backing out of discussions.
Troubles Galore For BYJU’S
At the heart of the matter is the edtech unicorn’s mounting losses. Its net loss surged nearly 20X YoY to INR 4,588 Cr in FY21 from INR 231.69 Cr in FY20. Besides, the company’s filing of financial statements was marred by delays and changes in revenue recognition methods and this resulted in critics across the board lashing out at the company for questionable accounting practices.
The startup has also been looking to raise funds amid volatile market conditions which has resulted in investors tightening their purse strings and focusing on profitable startups. While it boasts of growth, profitability seems to be a long shot for the edtech company currently.
In its bid to turn profitable, BYJU’S has laid off thousands of employees across multiple subsidiaries.
Recently, BlackRock also marked down the valuation of BYJU’S in its book by 50% to $11 Bn from $22 Bn earlier.
