SUMMARY
The loan will fuel BYJU’S ‘principal business activities’, and was granted at an interest rate of 7.5% per annum
The INR 300 Cr loan was granted as an advance to carry forward marketing activities and campaigns run by BYJU’S for Aakash
The loan comes even as BYJU’S raised $250 Mn in equity and debt from existing investors earlier this month
Weeks after raising funding from its Singapore entity, edtech decacorn BYJU’S has now picked up an unsecured loan of INR 300 Cr ($36.45 Mn) from its subsidiary Aakash Educational Services to fuel its ‘principal business activities.’
“The board of directors of the company, in their meeting held on October 3, subject to the approval of members in general meeting, has given their approval for granting unsecured loan to Think & Learn for an amount not exceeding Rs 300 crore,” said the coaching giant in its filing with the ministry of corporate affairs (MCA).
Think & Learn is the parent company of the edtech major.
According to the filing, Aakash granted the loan to BYJU’S parent company at an interest rate of 7.5% per annum.
The INR 300 Cr loan was granted as an advance to carry forward marketing activities and campaigns run by the edtech giant for Aakash, said a BYJU’S spokesperson.
“…Note that it is only for ‘principal business activities’ that a subsidiary and the parent company can give or receive loans. In this case, the principal business activity is marketing for the core business of BYJU’S Aakash on which the group has already spent and is now being reimbursed,” said BYJU’S.
The startup says that it buys media spots in bulk for all its group companies to benefit from economies of scale.
The development was first reported by The Morning Context.
BYJU’S Unsolved Profitability Puzzle
The move comes a month after BYJU’S paid $234 Mn in dues owed to private equity firm Blackstone as part of the $950-Mn acquisition deal of offline test prep giant Aakash Educational Services. BYJU’S acquired the tutorial chain in a deal that was executed in April last year.
With the deal now through, BYJU’S now appears well within its rights to take an INR 300 Cr loan from its subsidiary.
The move comes amidst a mega cost cutting drive underway at the edtech major. The ongoing funding crunch coupled with opening of schools have resulted in a major blow to the finances of the edtech major. Mounting losses, rising expenses, high customer acquisition costs (CAC) and delayed financial results have also attracted the ire of industry veterans who have questioned the corporate governance of the edtech major.
In the financial year 2020-21 (FY21), BYJU’S’ losses surged nearly 20 times to INR 4,588 Cr, while revenue from operations tanked 3.3 % to INR 2,428.3 Cr.
In a bid to cut corners, BYJU’S has shelved expansion plans and fired more than 4,000+ employees in mass layoffs across product, content, media, and technology verticals. Earlier this week, it also shut down its Thiruvananthapuram office as part of an ongoing restructuring exercise.
While it aims to become profitable by the end of FY23, the startup has refused to tinker with new cash-guzzling and largely unsuccessful products such as celeb-led courses.
Funding also appears to be a little scarce. Despite the ongoing market volatility and negative sentiment, the startup announced that it raised $250 Mn in equity and debt from existing investors, including Qatar Investment Authority in October 2022.
Interestingly, reports had surfaced at the time that said that the startup had turned down funding by new investors at a valuation of $11-12 Bn, instead settling for its current $22 Bn valuation.
As everything goes south for the edtech major, it remains to be seen how it will pull itself out of the quagmire. As negative market sentiment refuses to abate and as edtech fatigue peaks, India’s modest valued startup is at a crossroads to decide its future.
