BYJU’S is in talks to negotiate the terms for its $1.2-billion loan, sources familiar with the matter told DealStreetAsia, as India’s most valuable edtech firm cracks under mounting losses and cost pressures.
Despite being backed by marquee investors such as the Chan-Zuckerberg Initiative, Naspers, the Canada Pension Plan Investment Board (CPPIB), General Atlantic, Tencent, Sequoia Capital, Sofina, Verlinvest, IFC, Aarin Capital, Times Internet, Lightspeed Ventures, Tiger Global, and Owl Ventures, BYJU’s has been under the scanner for its accounting practices, mass layoffs, and widening losses for the past few months.
This follows the company’s dismal performance in FY21, when losses ballooned nearly 17 times to Rs 4,500 crore, raising questions about its valuation and ability to grow in the future.
Two weeks ago, Netherlands-based technology investor Prosus valued its 9.67% stake in BYJU’S at $578 million at the end of the September quarter, taking a conservative accounting stance for its stake in the edtech firm.
While sources declined to give more information about BYJU’S discussions with the creditors, Bloomberg reported that the company has appointed an adviser to discuss tweaks in covenants of the term loan B with creditors, including lower coupons and more time to repay.
According to Bloomberg, the three-month Libor (London Inter-Bank Offered Rate) has surged more than 21 times this year, making the loan costlier for BYJU’S. The margin on the loan was raised by an additional 50 basis points this year after its parent company, Think & Learn Pvt Ltd, failed to get rated. The loan is trading at 80 cents on the dollar on Wednesday after touching a record low of 64.5 cents in September, the report said.
The company declined DealStreetAsia’s request for comment.
While BYJU’S is the most valuable Indian edtech firm, it is also the biggest loss-making unicorn in India. In FY21, BYJU’S expenses surged 2.4 times to Rs7,027 crore, while its losses ballooned 14.9 times to Rs 4,564 crore. In October, the company laid off 2,500 employees from its umbrella of companies to rein in costs.
Despite everything happening at the company, its founder Byju Raveendran has maintained that the company is on the right track to becoming profitable by March.
“BYJU’S is now at that sweet spot of its growth story where the unit economics and the economies of scale both are in its favour. This means the capital that we now invest in our business will result in profitable growth and create sustainable social impact. Regardless of the adverse macroeconomic conditions, 2022-23 is set to be our best year in terms of revenue, growth, and profitability. Continued support from our esteemed investors re-affirms the impact created by us so far and validates our path to profitability,” Raveendran said in October.