Byju CEO raises $400m loan to invest in edtech giant’s $800m round

Byju Raveendran, Founder and CEO of Byju’s, is in talks with various international and domestic banks to raise $400 million in the form of a loan to finance 50% of the $800 million (about Rs 6,000 crore) funding round of the edtech giant, according to people familiar with the development. They said the move was part of the company’s strategy to show the founder’s confidence in the company as he leads the round and to help build investor interest at a time when Valuations are under pressure globally.

Sumeru Ventures, Vitruvian Partners and BlackRock also participated in the $800 million round, bringing the Bengaluru-based company’s valuation to around $22 billion from $18 billion previously, people say. close to the file.

“Raveendran is in discussions with various international and domestic banks to raise $400 million in the form of an equity loan. This may help it bolster investor interest at a time when valuations are under pressure,” one person said. “It’s a confidence-building measure to show that the founder is leading the funding round and also to tell existing investors ‘don’t worry about valuation’.”

After committing $400 million, which the company called a “personal investment,” Raveendran’s stake in the company fell from 22% to around 25%, the sources said.

“He could get this loan at a favorable interest rate,” another person said. “In addition to pledging the shares, he could also have provided a personal guarantee and a guarantee to the banks to raise this loan.”

Byju’s, the world’s most valuable edtech company, is focused on expanding its business in global markets and exploring new acquisitions. It has 150 million learners worldwide. The company is also in talks with Churchill Capital to raise $4 billion and go public through the Special Purpose Acquisition Company (SPAC). The round, if successful, could more than double its valuation to around $48 billion, sources said.

Last year, in October, Byju’s raised around $300 million as part of a broader round of new investments from investors such as Oxshott Venture Fund and Edelweiss Private Investments Trust. The financing had valued Byju’s at $18 billion, up from $16.5 billion in June last year.

In June 2021, Byju became India’s most valuable unicorn, surpassing the $16 billion valuation of fintech firm Paytm and which subsequently went for an initial public offering (IPO).

Byju’s plans to go public this year in the United States, the sources say. But India is also a solid option. It can make a primary listing in the United States and a secondary listing in India or vice versa. The United States and India are important and key markets for it.

The company expects to hit $3 billion in revenue for calendar year 2023, according to people familiar with the matter. It has already crossed over revenues of around $1.5 billion.

Byju Raveendran isn’t the only tech entrepreneur to take out a loan to fund his own business. In 2019, Japan-based banks like Nomura and Mizuho were funding OYO Hotels and Homes founder and CEO Ritesh Agarwal’s $2 billion loan. OYO Hotels and Homes had said Agarwal would invest $2 billion in the hospitality startup. Agarwal, who founded the hotel chain in 2013 at the age of 19, made the investment through RA Hospitality Holdings (Cayman). It had signed a $2 billion primary and secondary management investment round and was backed by global institutional banks and its financial partners and was subject to regulatory and shareholder approvals.

The company said its strong growth, improved margins and superior customer experience improvements were behind the decision. This made it one of the first management buys led by founders and executives in the technology and hospitality industry, globally. Lightspeed Venture Partners and Sequoia India, OYO’s early supporters, were selling off a portion of their holdings to help the founder increase his stake, and therefore his engagement, while remaining meaningfully invested in OYO’s long-term mission. the company.

Last year in December, IPO-linked mobility platform Ola said it had successfully raised $500 million via a Term Loan B (TLB) from international institutional investors of fame. Ola, led by Bhavish Aggarwal, said the proposed loan issue had received a staggering response from investors with interest and commitment of around $1.5 billion. A term loan provides borrowers with a lump sum of cash in exchange for specific borrowing terms. According to experts, term loans are generally granted to small businesses that need cash to buy equipment, a new building for their production processes or any other fixed assets.

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