Once India’s Most Valued, Byju’s is Worth Little Now

SECTIONSOnce India’s Most Valued, Byju’s is Worth Little NowBy Digbijay Mishra, ET BureauLast Updated: Jan 30, 2024, 03:51:00 AM ISTRate StoryFollow usShareFont SizeAbcSmallAbcMediumAbcLargeSavePDFCommentSynopsis

Once pegged as India’s most-valued startup, at $22 billion, edtech firm Byju’s is bracing itself for a 99% cut in its valuation as part of a potential rights issue.

IANS

Once pegged as India’s most-valued startup, at $22 billion, edtech firm Byju’s is bracing itself for a 99% cut in its valuation as part of a potential rights issue.
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Think & Learn, which runs Byju’s, has approached its existing shareholders to secure an immediate cash infusion of up to $200 million, the company said on Monday.

The terms of the issue could value the beleaguered startup at $20-25 million, people aware of the developments said.

Facing multiple crises and in urgent need of cash, the company is likely to price the offering at as low as $5 per share, which would ascribe it a post-money valuation of around $225 million, people cited above said. The post-money valuation includes the primary capital raised by a company in its current financing round.

A spokesperson for Byju’s did not respond to ET’s email query on the matter as of press time on Monday.

While Byju’s slide into distress has been apparent for a while, this round of financing brings finality to the stark reversal of fortunes at the company. The capital being raised, though, may help it tide over immediate challenges such as employee salaries and vendor payouts.

This round would also represent the sharpest fall in valuation for a large local startup after PharmEasy took a 90% hit on its valuation when it raised Rs 3,500 crore via a rights issue in November last year to clear debt. The pharmacy etailer was the first to take a hit since the onset of funding winter for the last 12-18 months.

However, if the Byju’s rights issue is not subscribed fully, and should the troubled edtech startup have to tap external investors, then the fair market value would be arrived at separately, people aware of the discussions said. Shareholders in Byju’s will see their stakes being diluted if they do not participate in the rights issue.

ET first reported on January 23 about the Byju’s rights issue, saying it could potentially value the Bengaluru-based firm at as low as $500 million.

The company has, in recent months, seen significant downgrades from several investors, including BlackRock, that valued it at just about $1 billion. Prosus, another key investor, last valued Byju’s at $3 billion.

In his letter to investors, founder and chief executive Byju Raveendran said, “This capital raise is essential to prevent any further value impairment and to equip the company with necessary resources to deliver on its mission.”

He said the company has not “shied away from taking several tough decisions” amid its current challenges and that the rights issue will offer existing shareholders the opportunity to participate in this proposed capital raise to the extent of their shareholding and beyond.

While the company expects its investors to pitch in with smaller cheques, multiple investors were still not convinced as of last week, people cited above said. The rights issue will be open for subscription for 30 days.

Raveendran — along with wife and cofounder Divya Gokulnath, brother Riju Ravindran and others — holds around 26% in Think & Learn. He is in talks with multiple investors to finance his pro-rata investment in the company, people said. This would be around $52 million — for the founder group to invest in the offer.

In the letter to investors, Raveendran also said the founders have infused around $1.1 billion over the past 18 months “as a testament to the steadfast and continuous faith in the business and its mission.”

Byju’s, after a delay of more than a year, finally filed its audited FY22 results with the Registrar of Companies, showing losses ballooning to $1 billion (at Rs 8,245 crore) even as revenue more than doubled to Rs 5,014 crore. The audit of its FY23 financials is underway.

Recently, a group of US lenders petitioned the bankruptcy court in India to initiate proceedings against Byju’s.