BYJU’S plans to raise $200M through rights issue

The board of Think and Learn Private Limited (TLPL), the parent company of BYJU’S, on Monday launched a rights issue to raise $200 million, extended to all equity shareholders.

TLPL’s planned rights issuance seeks to finance current capital expenditures and provide support for general corporate purposes, it said.

The rights issue is expected to take place with a post-money valuation of $225 million or 99% lower compared to BYJU'S previous funding round, which valued it at $22 billion, Moneycontrol reported.

Rights issues are a method for companies to raise capital by offering existing shareholders the opportunity to purchase additional shares at a discounted price.

Most existing investors, including founder Byju Raveendran, are expected to participate in the round. According to the company, BYJU’S founders have personally invested more than $1.1 billion in the edtech firm in the last 18 months.

“This rights issue is about those who care the most about BYJU’S stepping up as we continue to turn the company around. Along with being a founder, I am also the largest investor in the company,” Raveendran noted.

“The funds raised will be exclusively utilised to clear immediate liabilities and meet operational requirements, while maintaining the current rights of our valued shareholders,” he added.

Raveendran claimed that BYJU’S is now less than a quarter away from achieving operational profitability.

Last week, the edtech firm submitted its financial results for the FY22 to the Ministry of Corporate Affairs after a 22-month delay. It reported a consolidated loss of Rs 8,245 crore in FY22, up 80.6% from Rs 4,564 crore recorded in the earlier fiscal.

Meanwhile, its operating revenue rose 120%, touching Rs 5,014.6 crore in FY22 compared with Rs 2,280.3 crore in FY21. Its total expenses surged 94.5% to Rs 13,668.5 crore in FY22, compared with Rs 7,027.5 crore in FY21.

BYJU’S, which rapidly grew through strategic acquisitions, has encountered significant challenges post the pandemic-led edtech boom. These challenges include litigation concerning the $1.2-billion TLB, issues with the Enforcement Directorate, a liquidity crunch, and uncertainties regarding its core business and acquisitions.

In a note to shareholders, the founders of BYJU’S highlighted the implementation of strategic cost optimisation measures and the transition to a lean organisational structure focused on execution over the past months, underscoring the significance of raising capital to mitigate further value impairment.

BYJU’S escalating challenges are highlighted by BlackRock’s recent 95% markdown of its stake in the edtech firm. Last November, Prosus marked down the valuation of BYJU’S to less than $3 billion. In November 2022, Prosus first slashed the fair value of the company to $5.97 billion.