Edtech startup Byju’s is reportedly seeking to raise up to $250 million through the issuance of convertible notes by its subsidiary, Aakash Educational Services. The notes will convert into equity at a discount of 20% to the listing price of Aakash’s planned IPO, according to Bloomberg, citing sources familiar with the matter.
Byju’s acquired Aakash, a provider of brick-and-mortar tutoring services for teenagers, for $950 million in 2021. The pre-IPO funding round is expected to help Byju’s tide over a liquidity crunch as the due diligence process for raising funds at the parent level is taking longer than anticipated.
Discussions to raise funds at the parent level have reportedly stalled with private equity firm TPG and two Middle Eastern sovereign wealth funds. Meanwhile, Byju’s is in separate talks with creditors to renegotiate an agreement governing a $1.2 billion loan that’s in breach of covenants.
The pandemic-era boom in online tutoring helped Byju’s to grow rapidly, but the company has faced mounting losses since the boom subsided. Founder Byju Raveendran, a former educator himself, has pledged to make the company profitable this year and is reportedly working on a turnaround plan for the group.
The issuance of convertible notes by Aakash is expected to provide Byju’s with some much-needed financial support as it seeks to weather the storm of a prolonged due diligence process and renegotiate its loan agreement. Despite failing in its previous IPO attempt, Byju’s remains the world’s most valuable edtech startup with a valuation of $16.5 billion, according to CB Insights.
