Byju’s on Monday unveiled plans to take its tutoring service subsidiary Aakash Educational Services (AESL) public by the middle of next year. The edtech giant has made the announcement even as it struggles to raise new funds and has a deadline to pay $40 million interest on its loan of $1.2 billion.
A Byju’s spokesperson declined to comment on the status of the interest payment. According to industry sources, the company has plans to meet the June 5 deadline. A Bloomberg report said the situation is still fluid and failure to pay on that date means the $1.2-billion loan will default.
Meanwhile, Byju’s has raised Rs 2,000 crore ($250 million) from Davidson Kempner Capital Management, a US-based investment firm, in a structured instruments deal, according to people familiar with the matter. The funds have been raised against convertible notes issued by Aakash. Davidson Kempner Capital Management will get a stake in the upcoming market debut of Aakash. This is part of an ongoing $1-billion funding round the firm is raising in a mix of equity and structured instruments at a valuation of $22 billion. Around $700 million of $1 billion is expected to come through equity, for which Byju’s is in talks with existing and new investors. These include investors like Abu Dhabi’s sovereign wealth fund ADQ.
The funding is expected to help Byju’s support the IPO plans of AESL. Byju’s acquired Aakash in 2021 for $1 billion.
But challenges for Byju’s are beyond just raising funds. The company is yet to file its 2021-22 results with the Ministry of Corporate Affairs (MCA). Other edtech unicorns, such as Unacademy, upGrad, Vedantu, PhysicsWallah, and Eruditus, have already filed their FY22 financials. The company should have filed its annual results with the MCA by September last year. But, it has been delaying that for over seven months now. Before this, the company filed its FY21 results in September 2022, after a nearly 18-month delay.
“Some investors are telling Byju’s to file the latest financials first and then it will be easier to transfer the money into the company’s bank account,” said a person familiar with the matter.
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Another challenge for the firm is the creditors to Byju’s have reportedly pulled out of negotiations with the firm to recast a $1.2-billion loan. This is posing a new challenge to India’s most valuable start-up. The talks were called off after creditors moved court, accusing the firm of hiding $500 million of funds raised. Lenders can now sell the Term Loan B securities of the firm as the restraint that came as part of the negotiations is lifted.
The company proposed to rework its debt by increasing the interest rate on the $1.2-billion term loan due 2026, according to sources. They said the creditors may put pressure on the company to liquidate its assets in the US worth about $500-800 million to repay a part of a $1.2-billion loan if the firm is not able to provide the money from its cash reserves.
The Bengaluru-headquartered company’s US entity Byju’s Alpha was recently sued in Delaware by an agent of lenders to whom the company owes $1.2 billion. This happened after months of negotiations between creditors and Byju’s. The lawsuit was filed by GLAS Trust Company and investor Timothy R Pohl against Byju’s Alpha, Tangible Play, and Riju Raveendran. The two companies being sued are units of Think and Learn Private, edtech firm founded by Byju Raveendran.
Lenders have reportedly accused the company’s entity, which has no employees, of hiding $500 million as part of a battle between creditors and the edtech firm. The allegation was made during a court hearing last month in Delaware, where Alpha faces a lawsuit over who should control the firm. Lenders claim that because of a default earlier this year, they have the right to put their representative, Timothy R Pohl, in charge.
US asset manager BlackRock has again reduced the valuation of its share in Byju’s — this time to about $8.4 billion, according to its filing with the Securities and Exchange Commission for the March quarter.
Byju’s latest valuation, as estimated by BlackRock, is around 62 per cent down from the peak of $22 billion in April 2022. Before this, BlackRock had reduced the start-up’s valuation to $11.5 billion (as on December 31, 2022).