Byju’s, the world’s most valuable edtech startup, is reportedly seeking to raise up to $250 million through the issuance of convertible notes by its tutoring service unit, Aakash Educational Services.
The notes will convert into equity at a discount of 20% to the listing price of the unit’s planned initial public offering, according to sources familiar with the matter.
By raising funds through Aakash’s pre-IPO round, Byju’s aims to overcome a liquidity crunch as talks to raise funds at the parent level have been delayed due to a prolonged due diligence process. Byju’s had started conversations with bankers late last year to pick arrangers for Aakash’s IPO.
The acquisition of Aakash for approximately $950 million in 2021 provided Byju’s with a strong foothold in the test preparation segment of the edtech market.
However, due to stalled talks with private equity firm TPG and two Middle Eastern sovereign wealth funds for a capital increase at the parent level, discussions to raise funds in Aakash began. Byju’s is also in separate talks with creditors to renegotiate an agreement governing a $1.2 billion loan that is currently in breach of covenants.
Aakash Pre-IPO funding rounds
Founder Byju Raveendran, who comes from a teaching background himself, is now working on a turnaround plan for the company and has pledged to make it profitable this year. This move by Byju’s to raise funds through convertible notes indicates the company’s willingness to explore various financing options to address its financial challenges and position itself for future growth in the competitive edtech market.
Aakash Educational Services was a three-decade-old Indian education company that provided tutoring services to help students prepare for entrance exams to prestigious schools such as the Indian Institute of Technology (IIT). It operated brick-and-mortar centers across India and had a strong presence in the test preparation segment of the edtech market.
Byju’s is the world’s most valuable edtech startup and one of the largest education technology companies globally. Byju’s has over 100 million users, including 6 million paying subscribers, and offers a wide range of online learning products and services, including video lessons, interactive simulations, test prep courses, and educational games.
The company Byju’s has a strong presence in India and has expanded to several other countries, including the United States, the United Kingdom, Australia, and the Middle East.
Byju’s has revolutionized education by leveraging technology to create innovative and engaging learning experiences that cater to the individual needs and learning styles of students. Byju’s learning app offers interactive video lessons, personalized assessments, and gamified quizzes that help students learn and retain concepts more effectively.