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An educational technology empire rapidly assembled by Byju’s during a pandemic funding boom is now set to be dismantled, as what was once India’s most valuable start-up looks to asset disposals to settle its pressing debts.
Byju’s had used loans and a war chest of more than $2bn, gathered from venture capital during the pandemic, to go on an acquisition spree, aiming to capitalise on the trend towards online learning and become a global edtech powerhouse.
But overexpansion and a post-pandemic contraction in its market have left it desperate for cash to pay off creditors. The principal ones hold notes for a $1.2bn dollar-denominated term loan it took out in 2021 and has defaulted on, embroiling it in lawsuits and countersuits across the US.
In addition, it has borrowed $250mn this year from investment firm Davidson Kempner Capital Management, although two people with knowledge of the situation said under $100mn was disbursed before Byju’s defaulted on that loan too.
A lawyer familiar with the situation said he expected “Byju’s to drive a lot of M&A in the coming months”. Its efforts to realise cash through disposals are set to begin with Epic, a California-based digital reading platform, which it acquired in 2021 for $500mn. One person familiar with the matter said term sheets had been drawn up for a deal and another said Moelis, the investment bank, was running the sales process. Moelis declined to comment.
Nirgunan Tiruchelvam, head of consumer and internet at Singapore-based Aletheia Capital, said “a battle for the spoils” was beginning, as “various parts of the business could be sold to people who are interested in buying an asset at a discount to its fair value”.
Those spoils could include Byju’s subsidiary Great Learning, which offers online higher education courses. Through legal action, Byju’s term lenders won the right to appoint financial firm Kroll to oversee the Singapore-based edtech company. Byju’s acquired Great Learning just two years ago for $600mn, but two people familiar with the matter said it was likely Great Learning would ultimately be sold to help settle debts.
Byju’s financial problems also extend to the presentation of its accounts. It is roughly one year late in filing them for its financial year that ended in March 2022 and its chief financial officer Ajay Goel is quitting the company at the end of this week. Goel is rejoining Indian conglomerate Vedanta as CFO, after only leaving it in April to join Byju’s. He told investors in June that the audit to March 2022 would be completed by September.
The edtech company, which delayed reporting a $560mn loss in its 2020-2021 year, has suffered the resignation of its auditor Deloitte and of three board members representing its backers. One of them, Prosus, has written down its stake to give Byju’s an implied valuation of just $5bn, down from $22bn last year.
Byju’s did not respond to a request for comment.
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