BYJU’S-Owned Aakash Plans To Raise $250 Mn Ahead Of IPO

The initial public offering (IPO) proceedings of BYJU’S-owned coaching network Aakash Educational Services seems to have picked up pace. The edtech decacorn reportedly plans to raise as much as $250 Mn via convertible notes through its subsidiary ahead of the planned public listing. 

Sources told Bloomberg that Aakash will issue notes that will convert into equity at a discount of 20% to the offline coaching network’s listing price. The round is also expected to see participation from some of the existing investors in BYJU’S.

The edtech major has been looking to raise funds to tide over the cash crunch that has plagued the company over the past one year. People familiar with the development also said that the move to raise capital was necessitated after talks with private equity (PE) firm TPG and two other Middle Eastern sovereign wealth funds to raise investments for Aakash fell through owing to issues around due diligence.

Last month, it was reported that BYJU’S was in talks to raise more than $500 Mn in funding from multiple investors at its last-known valuation of $22 Bn to avoid potential debt issues.

A brainchild of Byju Raveendran and Divya Gokulnath, BYJU’S was founded in 2006 and emerged as the country’s biggest edtech platform largely on the back of pandemic-induced growth.

However, as schools and physical educational institutions opened post pandemic, BYJU’S growth somewhat hit a roadblock as students opted for in-person coaching centres rather than banking on online models. Consequently, BYJU’S acquired the 33-year old Aakash in April 2021 as it looked to cash in on the lucrative offline play. 

While the deal was itself marred by challenges of delayed payments, BYJU’S finally closed the transaction after paying INR 1,983 Cr to venture capital (VC) firm Blackstone for its services. Later on, it also emerged that the edtech decacorn was facing potential debt issues as it looked to renegotiate the terms of its $1.2 Bn term loan.

In October last year, the edtech decacorn picked up an unsecured loan of INR 300 Cr from Aakash for its ‘principal business activities’.

BYJU’S has recently been in the news for all the wrong reasons. The company undertook layoffs across its multiple subsidiaries, firing more than 4,000 employees last year. 

BYJU’S has also been marred by heavy loss which has cast a spotlight on the cash-guzzling businesses it runs. After multiple delays in filing its financial statements for FY21, the company reported a 20X increase in its net loss to INR 4,588.75 Cr during the year.

Despite this, the company has continued to splurge on growth. In a letter written to the employees late last year, CEO Raveendran said BYJU’S was planning to hire 10,000 more employees in 2023 and would add an additional 250 physical coaching centres to its kitty through Aakash.

BYJU’S has also been dogged by regulatory hurdles as it was subject of a National Commission for Protection of Child Rights (NCPCR) probe for mis-selling its courses and pursuing customers who were unable to pay for its products. 

Despite the drama, BYJU’S continues to be one of the biggest players in the Indian edtech space, which is projected to grow to a market size of $10.4 Bn by 2025.