Byju's To Raise $250 Million Via Convertible Notes In Pre-IPO Funding For Aakash: Report

Aakash Educational Services will issue the notes that will convert into equity at a discount of 20 per cent to the listing price of the unit’s planned initial public offering

Byju’s is in separate talks with creditors to renegotiate an agreement governing a $1.2 billion loan that’s in breach of covenants.

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World’s most valuable edtech start-up, Byju’s, is seeking to raise as much as $250 million through the issuance of convertible notes by its tutoring service unit, citing sources privy to the development told news agency Bloomberg.

The company’s tutoring business provider, Aakash Educational Services, will issue the notes that will convert into equity at a discount of 20 per cent to the listing price of the unit’s planned initial public offering (IPO), the sources said. Some investors in Byju’s are expected to participate in the round, they added, without divulging much details.

The pre-IPO round at Aakash will help the start-up to tide over a liquidity crunch as talks to raise funds at a parent level are getting delayed with a prolonged due diligence process. The Bengaluru-based company had started conversations with bankers late last year to pick arrangers for Aakash’s IPO, Bloomberg has reported.

A representative for Byju’s declined to Bloomberg’s request for comment.

The three-decade-old Aakash, acquired by Byju’s for about $950 million in 2021, runs brick-and-mortar centres to help teenagers prepare for the gruelling tests that rank them for entry into coveted schools such as the Indian Institute of Technology. Discussions to raise funds in Aakash started after talks with private equity firm TPG and two Middle Eastern sovereign wealth funds for a capital increase at the parent level delayed during due diligence, they said.

Meanwhile, Byju’s, which grappled with mounting losses after the pandemic-era boom in online tutoring petered out, is in separate talks with creditors to renegotiate an agreement governing a $1.2 billion loan that’s in breach of covenants. Founder Byju Raveendran, a son of teachers and a former educator himself, is now working on a turnaround plan for the group, pledging to make it profitable this year.

Last month, Byju's sacked 15 per cent of its employees, mostly from its engineering teams, in a fresh round of layoffs. The company asked more than 1,000 workers, or 15 per cent of its workforce, to leave. This comes as the company is trying to bring down costs amid slower revenue growth.