Byju's, the world’s most-valued edtech firm has taken an unsecured loan of Rs 300 crore ($36.45 million) from Aakash Educational Services for its “principal business activities,” according to a report by Moneycontrol. Aakash Educational Services is a wholly owned subsidiary of Think & Learn Pvt, the company that operates Byju’s. According to the report, the loan was granted at an interest rate of 7.50 per cent per annum.
“Think & Learn is in the requirement of funds for its principal business activities,” Aakash Educational Services said in its latest filing with the ministry of corporate affairs. “The board of directors of the company, in their meeting held on October 3, subject to the approval of members in general meeting, has given their approval for granting unsecured loan to Think & Learn for an amount not exceeding Rs 300 crore.”
According to Moneycontrol, “The Rs 300 crore loan from Aakash Educational Services is in effect an advance against the marketing activities and campaigns that Byju’s has been running for Aakash,” a spokesperson for Byju’s said. “In order to benefit from the economies of scale, Byju’s buys media spots in bulk for all its group companies. This is a strategy that has yielded really positive results for both the group and Aakash.”
Aakash was acquired by Byju’s back in April 2021 for a cash and stock deal of almost $950 million. The company then deferred part of its payment for Aakash to September 23, 2022, and eventually managed to pay the amount to shareholders of Aakash.
Byju’s Aakash has grown more than 100 percent since the acquisition, the spokesperson said, adding that it is only for principal business activities that a subsidiary and the parent company can give or receive loan, the report said.
“In this case, the principal business activity is marketing for the core business of Byju’s Aakash on which the group has already spent and is now being reimbursed,” the spokesperson said. Byju’s had about Rs 9,800 crore in its bank as of October 27 and the company is not struggling for cash, the spokesperson added.
Byju’s taking an unsecured loan from its wholly owned subsidiary for business activities comes as the company looks to cut operational costs amid a prolonged funding winter for the edtech sector, Moneycontrol.
Byju’s said earlier this month that it would lay off 2,500 employees over the next six months to reduce redundancies and achieve profitability by March 2023.
It was previously reported by Moneycontrol that Byju’s turned down funding by new investors at a valuation of $11-12 billion and instead settled for its existing $22 billion valuation. Last week, Byju’s said it would raise about $250 million from existing investors at an unchanged valuation, a sign of a flattening valuation curve, the report said.
Byju’s grew to $22 billion from under $10 billion in the past two years following the coronavirus outbreak. But the company’s revenue didn't grow in FY21, the first year of the pandemic when edtech companies got a boost as learning moved online. Byju’s blamed changes in its revenue recognition methods for the surprise revenue drop. The company’s losses, however, swelled to Rs 4,588 crore, making it the biggest loss-making startup in India for FY21, according to the report.