Byju’s Offers Rights Issue; Depreciates in Valuation
Indian online educational platform Byju’s is seeking $200 million in continued investment at a post-money valuation of $225 million, reflecting a tremendous de-escalation from the $22 billion valuation in which the country’s highest-valued startup stood just two years ago, according to our sources.
Details and Expectations from The Rights Issue
Think & Learn Pvt. Ltd., the conglomerate operating Byju’s, aims to collect the funds through a rights issue that is only available to existing investors. These investors are granted a 30-day window to make a decision on their participation. The enormous downcast in valuation from peak levels indicates that non-participating investors’ shareholdings risk significant reduction, as the shares are being offered at only 0.1% of the peak valuation during the last funding round.
Founder’s Statement and Utilization of Funds
Byju Raveendran, Byju’s founder, assured in a statement that the proceeds would be used distinctively to settle impending liabilities and meet operational needs, while preserving the current rights of shareholders. This funding strategy allows the company to compile funds immediately while sidestepping the fair calculation encompassing its subsidiaries, associated businesses, and other assets.
Valuation Concerns and Pressure for Quick Fundraise
The esteemed company, Byju’s, reached its peak valuation in late 2021 due to the remote learning trend fueled by the pandemic. However, fortunes began to dwindle as the economy reopened, prompting students to return to traditional schooling. In the face of growing liabilities owed to suppliers and employees, the current move instigates the rush to accumulate capital. The intended early fundraise is set to resuscitate the company against ensuing capital needs and growing supplier and worker liabilities
A Move in Favor of All Shareholders
Raveendran emphasized that offering a rights issue ensures equal opportunity for all shareholders to participate and sustain their respective stakes in the company. It preempts the need to subscribe valuations and promises benefits best serving the company’s broader interests.
Company’s Operations Status
According to a media statement by Byju’s, the platform is about to reach operational profitability in less than a quarter. It highlights the strategies the company has recently implemented and the strength of its business model, showing signs of enduring the entrepreneurial roller-coaster ride. All eyes will be on each investor’s reaction to this unique opportunity, as non-investment means risking proportionate dilution.
The Future Outlook for Byju’s
The future for Byju’s largely depends on the success of this rights issue. If unsuccessful, there will be an attempt to seek external funding to fulfill the need. Despite the turbulence, the founders have shown a strong commitment as they have infused more than $1.1 billion into the company over the past 18 months. The journey ahead will undoubtedly be of great interest to stakeholders and the broader tech and education industries.
