Byju's turns to wholly-owned Aakash for unsecured Rs 300 crore loan for 'principal business activities'

Think & Learn Pvt, the company behind the world’s most-valued edtech firm Byju’s, has raised an unsecured loan of Rs 300 crore ($36.45 million) from its wholly-owned subsidiary Aakash Educational Services for "principal business activities".

The move is an indication that one of India’s biggest startups is struggling for liquidity amid falling demand for online learning solutions and the funding to the sector is drying up.

“Think & Learn is in the requirement of funds for its principal business activities. Hence at the request of Think & Learn, the Board of Directors of the company in their meeting held on October 3, subject to the approval of members in general meeting, has given their approval for granting unsecured loan to Think & Learn for an amount of not exceeding Rs 300 crore,” the latest filing of Aakash Educational Services with the ministry of corporate affairs reads.

According to the filing, the loan of Rs 300 crore was granted at an interest rate of 7.50 percent per annum.

While Byju’s did not immediately respond to queries sent by Moneycontrol, Aakash said, "We won't be commenting". News agency The Morning Context was the first to report the development.

Byju’s raising an unsecured loan from its wholly-owned subsidiary for business activities comes at a time when the company is aggressively looking to cut costs on the operations front amid a prolonged funding winter for the edtech sector.

Earlier this month, Byju’s said that it would layoff 2,500 employees over the next six months to reduce redundancies and to achieve profitability by March 2023.

Moneycontrol has reported how the company was offered a valuation of $11-12 billion by new investors but it settled for its existing $22 billion valuation.

The raising of loan also comes on the backdrop of a $250 million fundraise at an unchanged valuation. Last week, Byju’s said that it would raise about $250 million from existing investors at an unchanged valuation, a sign of a flattening valuation curve.

The curve has been steep for Byju’s otherwise as the company’s valuation had grown to $22 billion from under-$10 billion in the last two years following the coronavirus outbreak.

But, the company's revenue didn't grow in FY21 (2020-21), which was the first year of the pandemic, which gave a shot to edtech companies as learning moved online.

Byju’s blamed changes in its revenue recognition methods for the surprise drop. The company’s losses, however, swelled to Rs 4,588 crore, making it the biggest loss-making startup in India for FY21.