Byju’s raises $250 million from US investment firm Davidson Kempner

Byju's undertakes strategic review of more assets

Byju's, the world's most-valued ed-tech firm, has raised $250 million through structured instruments through US-based alternative investment firm Davidson Kempner in what will be a much-needed fund infusion for the startup.

Moneycontrol reported earlier this week that the ed-tech firm was looking to raise $1 billion in a mix of equity and structured instruments via US-based asset management companies and Middle East-based sovereign funds. Of the $1 billion, about $300 million would be raised through structured instruments, with the rest coming as equity at a flat $22 billion valuation.

Structured instruments are market-linked investment products based on securities. These can be later converted into shares (typically at a discount) at the time of events like an initial public offering.

Byju's and Davidson Kempner declined to comment on the matter.

The funding will be a vindication of sorts for Byju's founder and CEO, Byju Raveendran, as it comes weeks after India's financial probe agency, the Enforcement Directorate (ED), conducted searches at its offices under the provisions of the Foreign Exchange Management Act (FEMA).

The funding also comes at a time when India’s start-up ecosystem is witnessing one of the worst funding winters in recent times, with some of the most prolific start-up investors in the country will be a vindication of sorts for Byju's founder and CEO, Byju Raveendran, as it comes weeks after India's financial probe agency, the Enforcement Directorate (ED), conducted searches at its offices under the provisions of the Foreign Exchange Management Act (FEMA). The funding deliberations also come at a time when India’s startup ecosystem is witnessing one of the worst funding winters in recent times, with some of the most prolific startup investors in the country cutting bets by more than 80 percent. Moreover, investors have become extremely cautious about edtech companies, as these firms have seen a drop in demand for online learning post the pandemic.">cutting bets by more than 80 percent. Moreover, investors have become extremely cautious about ed-tech companies, as these firms have seen a drop in demand for online learning post the pandemic.

The fresh funding will also help Byju’s to prepay a part of the $1.2 term loan B (TLB) it had raised in 2021, the people said. Byju's had raised a TLB of $1.2 billion from a clutch of investors in 2021, one of the largest for Indian startups and amid mounting concerns around the firm, some lenders of the company were seeking prepayment of $200 million over restructuring the loan, according to a media report.

Byju's has been renegotiating terms with its lenders and had offered to increase the rate of interest on its $1.2 billion TLB by 200 basis points (bps) as part of renegotiating its debt-financing arrangements.

Byju's, which is also India's most-valued startup, has been under fire since the start of 2022 for a range of issues including accounting irregularities, alleged mis-selling of courses and mass layoffs. The company has laid off over 3,500 employees in the last 12 months as it was hit by a double whammy of drying venture capital funding and slowing demand for online learning services.

Byju's is also looking to get its tutoring services unit -- Aakash Educational Services, which it acquired in April 2021 for nearly a billion dollars, listed on India's stock exchanges at a valuation of $3-4 billion. But, the company has also held exploratory merger talks for Aakash with its biggest rival Unacademy, Moneycontrol reported exclusively earlier in March.

Founded almost a decade back by Raveendran, a former teacher, and his wife Divya Gokulnath, Byju's has raised over $5 billion in funding from equity and debt investors to date. It last raised a $250 million round in October at a flat $22 billion valuation.