Edtech Giant Byju’s Faces 99% Valuation Cut; Infusion Of Over 1 Billion Dollars Over The Past 18 Months
Byju's, once a $22 billion edtech giant, faces a drastic 99% valuation cut. This comes through as a potential $200 million rights issue amid financial turmoil.
Byju’s valuation plummets from $22B to a potential $225M
Founder emphasizes a $200M rights issue's urgency to prevent further value erosion
Edtech giant Byju’s, once soaring at a $22 billion valuation, is now facing a daunting 99% cut in its worth as part of a potential rights issue. The move comes amid multiple crises and urgent cash requirements for the beleaguered startup.
Byju’s parent company, Think & Learn, has reached out to existing shareholders to secure a cash infusion of up to $200 million. However, sources suggest that the terms of the issue might plummet the company's valuation to a meager $20-25 million.
The proposed share price of $5 could result in a post-money valuation of approximately $225 million, including the primary capital raised in the current financing round.
Facing pressing challenges, including the need for employee salaries and vendor payouts, Byju’s is seeking a lifeline to overcome its immediate hurdles. This funding round is poised to mark the steepest fall in valuation for a prominent Indian startup since PharmEasy's 90% hit last year. PharmEasy opted for a rights issue to clear debt, becoming the first casualty in the funding winter that has gripped the market for the past 12-18 months.
If the rights issue doesn’t attract a full subscription, external investors might be called upon to determine the fair market value separately. Shareholders who abstain from participating in the rights issue risk diluting their stakes.
This potential crisis was first reported by ET on January 23, hinting at a valuation as low as $500 million.
Founder’s plea and commitment
In a letter to investors, Byju Raveendran, the founder and CEO, emphasized the necessity of raising capital to prevent further value erosion and equip the company with resources to fulfill its mission.
Raveendran, along with other key stakeholders, currently holds around 26% in Think & Learn. The founder group is in talks with investors to secure around $52 million for their pro-rata investment in the rights issue.
Raveendran highlighted the founders' continuous faith in the business, citing an infusion of around $1.1 billion over the past 18 months. The ongoing audit of FY23 financials follows a delay of over a year in filing audited FY22 results, revealing losses of $1 billion and doubled revenue at Rs 5,014 crore.
Legal battles and drama
Byju’s is not just grappling with financial woes. A group of US lenders has petitioned the Indian bankruptcy court, urging proceedings against Byju’s over a $1.2 billion term loan. The company, in response, deems the filing premature, dismissing the allegations as baseless.
As Byju’s navigates this precarious financial terrain, its fate hangs in the balance, with the rights issue serving as a pivotal moment in its journey from the heights of valuation to a challenging new reality.