Turbulence continues for Byju’s amid shareholder and debt crises
India’s edtech giant, Byju’s, is facing a multitude of trouble as reported from our sources. Global investment group Prosus and US private-equity firm Blackstone have objected to the conversion terms of business magnate Ranjan Pai’s substantial debt into equity in Aakash Education Services.
A Rash Examination of Value
Prosus, a stakeholder in Think & Learn (T&L), the parent entity of Byju’s, and blackstone, which owns a part of Aakash, have raised objections regarding the conversion of Ranjan Pai’s $250-300 million of debt in Aakash into equity. This topic heated up after Aakash’s board provisionally approved this proposal last week. The main point of dispute is the valuation this conversion implies for Ranjan Pai’s stake, valuing Aakash at $600 million, a figure significantly lower than the $950 million Byju’s paid to acquire it in 2021. A valuation reduction over a third in only three years is proving hard to swallow for equity holders especially considering Aakash’s rising financial performance.
Financial Woes Paint a Grim Picture
Byju’s meanwhile is dealing with its own financial troubles including a rough loan repayment history. Some international lenders have recently filed insolvency petitions against T&L. This includes a group which had extended a $1.2-billion term loan. A potential lawsuit from Teleperformance Business Services Ltd., another creditor, adds to its tribulations. Such legal proceedings could critically damage the value of India’s top edtech venture and consequentially affect Aakash’s valuation as well.
Byju’s Ailing Valuation
Once valued by investors at $22 billion in October 2022, Byju’s estimated worth has taken a staggering nose-dive down to $1 billion as per Blackstone’s recent revision. CEO Byju Raveendran announced a rights issue of shares to avoid further value degradation, stating it was “essential to prevent any further value impairment and to equip the company with necessary resources”. The resulting valuation of T&L may fall between 1% of its peak amount and a quarter of Blackstone’s last revision. This predicament serves as a cautionary tale for companies aiming for fast-tracked growth.
Learning from the Byju’s Fall
The decline of Byju’s graph as a reminder for all organizations striving for rapid expansion. While it seemed to have all factors in its favor, particularly a global push towards online learning due to the pandemic, managing the rapid growth proved overwhelming for the company. This underlines the importance of cautious and well-managed growth strategies and the risks of unchecked expansion.
