Edtech firm Byju's plans to raise funds at a lower valuation of USD 7-8 billion as the company looks to shore up its financials with adequate liquidity, said a senior executive at the company on Tuesday.
The parent of Byju's Think and Learn, banking on its overall "improved performance," is hopeful of a greater valuation ahead of its rights issue being planned in February to raise funds.
Byju's India Chief Financial Officer, Nitin Golani, said that the edtech major is in need of funds and aims to raise it at a lower valuation to make the offer lucrative for investors and ensure adequate liquidity support for the company.
He said that Aakash was acquired when the revenue of the company was around Rs 1,000 crore, and now it is at Rs 2,700 crore, which, at the bare minimum, gained a valuation of USD 2 billion from one billion.
According to Golani, Byju's acquired Great Learning for USD 600 million when the company's revenue was only Rs 400 crore. The same company now has revenue between Rs 900 and Rs 1,000 crore, resulting in a rise in its valuation.
"Our core business revenue has also increased significantly. There are several brands within the company that have seen an increase in valuation. If you combine the valuations of all the businesses, it will be worth a bare minimum of around USD 7-8 billion," Golani said.
The company has now been institutionalised to organise weekly meetings with investors, take their feedback, and execute it, he said.
"The company's shareholders are watching the business closely, and they understand the company's worth. If they are offered an attractive valuation in the range of USD 3-4 billion, then a lot of investors, who are financial investors, will take up this lucrative offer, invest in the company, and provide liquidity support to the company," Golani said.
Lowered valuations
Blackrock, an early investor in Byju's, recently lowered the company's valuation to less than USD 1 billion against the peak valuation of USD 22 billion, the figure at which it raised funds in March 2022.
Dutch venture capital Prosus has lowered the valuation of Byju's to below USD 3 billion. According to Golani, the company has no control over the way shareholders mark the valuation of the company.
"The valuation of the company by shareholders is not in my control. We have not put any numbers on the table for rights issues. We are negotiating with investors. The rights issue is a market discovery process. It will be discovered in a month or so. We are planning it in February," Golani said.
Operational performance
On Tuesday, Byju's filed its financial results after a delay of approximately 22 months, revealing a widening operational loss of Rs 6,679 crore in the fiscal year 2022. This increase in losses is primarily attributed to the subsidiaries White Hat Jr and Osmo. In the preceding fiscal year 2021, the company reported an operational loss (EBITDA) of Rs 4,143 crore. Despite the increased losses, BYJU's demonstrated significant revenue growth, with its revenue more than doubling to Rs 5,298.43 crore in FY22 from Rs 2,428.39 crore in FY21, as stated in the regulatory filing.
"Underperforming assets were primarily White Hat Jr (WHJ) and OSMO (Tangible Play), which amounted to 45 per cent of the losses at around Rs 3,800 crore," Byju's said.
Excluding WHJ and Palo Alto-based edtech startup OSMO, Byju's recorded three-fold growth year-on-year in its total income in FY22.
Byju's subsidiaries, Aakash and Great Learning, experienced substantial growth, with increases of 40 percent and 77 percent, respectively, immediately following their acquisition. Aakash's revenue surged by 40 percent to Rs 1,491 crore in FY22 from Rs 1,065 crore in FY21.
Similarly, Great Learning recorded an impressive 80 percent rise in revenue, reaching Rs 628 crore in FY22 compared to Rs 354 crore in the previous fiscal year. While discussing Byju's overall performance, CEO Byju Raveendran mentioned the company's consistent improvement in revenue and EBITDA in FY23 and FY24 without providing specific financial details. However, the company has missed its target timeline to achieve profitability.
Byju's auditor highlighted material uncertainty regarding the company's ability to continue as a going concern due to ongoing net losses and accumulated losses. This uncertainty is compounded by litigation outcomes related to the USD 1.2 billion Term Loan B facility (TLB Loan) availed by Byju's Alpha Inc.
Spending on acquisitions
However, the management is optimistic, based on a legal opinion, that the TLB loan is unlikely to be required to be paid in the foreseeable future. CEO Byju Raveendran also mentioned that the company has significantly reduced spending on acquisitions like White Hat Jr (WHJ) and OSMO.
"Our marketing spend in these businesses is zero. Everything that is coming into the company is through organic routes. I do not want to continue running that business, which is not economically viable at the scale where it is operating. I want to bring it down to a scale where it is economically viable to have a sort of self-sustainable business," Golani said.
He said that the employee cost has been significantly optimised, and most of the restructuring exercise within Byju's group was at these two entities.
"My immediate mandate is to prepare results for FY23 and then complete the financial results for FY24 after the fiscal year ends in March 2024," Golani said.
The effort is to file FY23 results before the proposed rights issue, he added.
(With PTI inputs)
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