Byju’s launches rights issue to raise $200 million from existing investors at a valuation of $225 million | Top Vip News

The board of Think and Learn Pvt Ltd, the parent company of Byju’s, has approved a rights issue to raise $200 million from existing investors, effective January 29 and valid for 30 days, sources said. The issuance will come at a post-money valuation of $225 million, which is 99 percent lower than the company’s last funding round, which took place at a valuation of $22 billion, the sources said.

According to people familiar with the developments, the company expects most of the existing investors, including founder Byju Raveendran, to participate in the round. The subscription price has been kept to a minimum so that all existing investors can participate and benefit.

To be sure, rights issues are often valued much lower than a company’s fair market valuation to entice existing investors to double down. An investor money control spoke called the matter “brave” and that it is a smart strategy when the company has been dragged to court under insolvency rules.

This comes at a time when the edtech company is battling a severe liquidity crisis. Even as founder and CEO Byju Raveendran reportedly mortgaged his houses to pay the salaries of thousands of employees, lenders and suppliers have dragged the embattled edtech company to court under insolvency rules , in an attempt to force payment of dues.

In a letter sent to shareholders on January 29, Raveendran informed them about the board’s decision to raise capital through the rights issue mechanism.

According to a source close to the developments, Byju’s has reduced the monthly burn rate of its core business to Rs 50 crore and aims to reach operational break-even in the next 2-3 months. Additionally, the company plans to reconstitute the Board after completing the FY23 audit.

Currently, the company’s board of directors consists of Raveendran himself, his co-founder and wife Divya Gokulnath, and his brother Riju Ravindran, following the departure of other members last year.

The founder continued to draw parallels between the battles the company is going through and the struggles described in the verses of ‘Invictus‘ by William Ernest Henley: “In the clutches of circumstance I have neither winced nor cried aloud. Under the blows of chance, my head is bloody, but upright.”

“We believe that a rapid capital raise will provide the company with the resources it needs to rebuild and scale. This will be used for the continuation of business operations, to manage liabilities and make the company more sustainable,” Raveendran said at the letter.

Previously in an interview with money controlNitin Golani, Byju’s chief financial officer in India, said the company plans to offer a lucrative valuation to some of the existing investors.

This comes amid a series of valuation downgrades by Byju’s investors over the past year. In November 2023, technology investor Prosus wrote down the value of its stake in Byju’s, resulting in a company valuation of less than $3 billion, representing an 86 percent decline from the previous valuation of $22 billion.

More recently, global investment management firm BlackRock, which owns less than a 1 percent stake in Byju’s, cut the edtech company’s valuation to $1 billion from a high of $22 billion it hit at early 2022.

Raveendran added that the company’s board of directors believes that it is imperative for the company to raise capital to deliver strong value for shareholders.

“This capital increase is essential to avoid any further deterioration in value and provide the company with the necessary resources to fulfill its mission,” he added.

To be sure, the company had been trying to raise a round of funding for more than a year. The fundraising attempts come as the edtech giant faces an acute liquidity crisis and its auditors express concerns about its ability to continue as a going concern over the next 12 months.

“It has been 21 months since our last external capital raise, during which we reduced our spend and worked to become an efficient, execution-focused organization,” Raveendran said.

In the letter, Raveendran also revealed that the founders have invested more than $1.1 billion of their personal funds in the company over the last 18 months.

“We have made immense personal sacrifices for the good of the company. We have spent our lives building this company and believe fervently in its mission. Our enthusiasm and zeal continue unabated,” Raveendran said.

Last week, the company released its FY22 financial statements reporting a 118 per cent rise in consolidated revenue from Rs 2,428 crore in FY21 to Rs 5,298 crore in FY22. Its losses also skyrocketed from Rs 4,564 crore in FY21 to Rs 8,245 crore in FY22.

Byju’s filed its FY22 financial statements with the Ministry of Corporate Affairs (MCA), almost 22 months after the reporting period ended. Meanwhile, the audit of its FY23 finances is yet to be completed, even as FY24 is ending.

Byju’s, once India’s most valued startup, has come under fire since early 2022 for a variety of issues, including accounting irregularities, alleged mis-selling of courses and mass layoffs.

“The last few months have been difficult for our company, as it faces challenges that few companies have faced… In these uncertain times, we have not shied away from making several difficult decisions in the best interest of the Company, and we will continue to do so. in the coming months,” Raveendran added in the letter.

The company has laid off thousands of employees in the past 12 months as it battled a double whammy: a shortage of venture capital funding and slowing demand for online learning services. Since then, members of his investor board have also left, citing differences with Raveendran.

Since then, the company has tried to fix some of the problems. Its first investor, Ranjan Pai, plowed the capital, created an advisory board with veterans like Mohandas Pai and Rajnish Kumar and appointed Arjun Mohan as CEO. It is also in talks to sell assets such as Great Learning and Epic.