Byju’s, the world’s most valued edtech startup, lowered its valuation seek by 99% in a rights issuance on Monday as it struggles to pay its creditors and operational costs. Startup wants $200 million in rights to issue cash “essential to prevent any further value impairment.”
The business, formerly India’s most valued, is resetting its valuation to “next to nothing” in the rights offering, where all current investors can participate, a source said. The source, who asked for anonymity when disclosing nonpublic information, said that if Byju’s raises $200 million, its post-money valuation will be $220 million to $225 million, a 99% reduction from its 2022 $22 billion estimate.
Byju’s creator, Byju Raveendran, wrote to shareholders on Monday, claiming he and fellow edtech group founders had invested $1.1 billion in the Bengaluru-based firm in the previous 18 months and needed investor help to stay afloat. Our personal sacrifices for the organization are significant. Raveendran stated in the Eltrys-viewed letter, “We have spent our lives building this company and are fervent believers in its mission.”
The rights problem arises when Byju’s seeks cash amid a funding crisis. In 2021 and 2022, the startup acquired more than a dozen firms for $2.5 billion and funded $5 billion in equity and debt from General Atlantic, Silver Lake, Peak XV, Lightspeed, Chan Zuckerberg Initiative, BlackRock, UBS, Prosus Ventures, and B Capital. According to Byju’s, the rights problem should be resolved in 30 days.
“Since our last external capital raise 21 months ago, we have cut our burn and become a lean, implementation-focused organization. Raveendran stated in the letter that the board feels the firm must seek cash to develop a glidepath to high shareholder value.
Recently, many high-profile Indian startups have failed to attract money, including Byju’s. Last year, online pharmaceutical company PharmEasy reduced its valuation by 90% to below $600 million in a rights offering. The rights issue followed the startup’s $1.5 billion equity and debt fundraising.
Byju’s has sought money for over a year. After Deloitte and three key board members left, the startup’s $1 billion fundraising discussions fell down last year. However, Byju’s raised less than $150 million from Davidson Kempner and had to return the investor the whole agreed-upon amount following a technical default on a separate $1.2 billion term loan.
SPAC deals were planned to take Byju’s public in early 2022 at a $40 billion valuation. According to a source, Russia’s invasion of Ukraine in February lowered markets, causing Byju’s to postpone its IPO. As market circumstances worsened, so did Byju’s business prospects.
Recently, several Byju investors have openly questioned the startup’s business actions and demanded more oversight. The rights problem lets Byju’s lose naysaying investors. Non-participants in the rights offering will forfeit all startup equity.
