Byju’s is facing escalating challenges as the troubled edtech firm grapples with a severe cash crunch. According to sources familiar with the matter, Byju’s is said to be considering utilizing a portion of the proceeds from the planned sale of its unit, Epic, to sustain operations at Think & Learn.
Although three bids totalling approximately $400 million have been received for Epic, the company is expected to draw at least $80-100 million from the sale, reserving the remainder for term loan B (TLB) lenders.
The critical factor in this scenario is the speed at which the deal is finalized and funds are transferred while Byju’s concurrently explores various avenues to secure much-needed financing.
Joffre, a tech-focused buyout firm, is reportedly the front-runner in this regard. Simultaneously, Byju’s has informed its employees of a reduction in the notice period, ranging from 15-60 days to 15-30 days, depending on seniority, as part of cost-cutting measures.
For Level 1 to 3, which includes executives, associates, specialists, senior executives, senior associates, senior specialists and team leads, the notice period would be 15 days, while the same for Level 4 and above would be 30 days.
Presently, Think & Learn is estimated to employ around 13,000-14,000 individuals.
Byju’s is implementing these desperate measures as it approaches its annual general meeting on December 20. Further, investors demanding specific conditions, including founder Byju Raveendran easing out of daily operations, have added to the urgency.
Amidst these financial challenges, Byju’s is engaged in discussions with TLB creditors regarding the Epic sale proceeds.
Approximately $300-320 million is expected to be reserved for these lenders. The company aims to expedite the Epic sale before the upcoming holidays.
Top investors in Byju’s had put certain conditions for infusing fresh capital into the company. These include presenting the audited FY23 results as well as easing of control from company founder and chief executive Byju Raveendran in the firm’s day-to-day operations.
Earlier, Byju’s faced criticism for delaying November salaries for around 1,000 employees, citing a ‘technical glitch,’ which was later resolved.
Among the agenda for the AGM is Byju’s plan to appoint MSKA & Associates as its statutory auditor for the period of FY23-FY27. It will also adopt and approve delayed FY22 financials.
The company only issued a part of its FY22 financials on November 4 to the media showing a 2.3 times growth in standalone revenue at Rs 3,569 crore. Ebitda loss of the core business — financials for which were reported — narrowed to Rs 2,253 crore in FY22, from Rs 2,406 crore in the previous year.
Investors in Byju’s, including Prosus, have marked down its valuation to below $3 billion from the initial valuation of around $5.1 billion in March.
In June, Prosus’ representative on Byju’s board, Russell Dreisenstock, resigned from the edtech’s board. Investors like Blackrock have also marked down Byju’s multiple times, with the lowest being a little over $8 billion.
The cash crunch also coincides with an Enforcement Directorate (ED) show cause notice to Byju’s and Raveendran for FEMA violations involving Rs 9,362.35 crore.
Byju’s is additionally entangled in a dispute with the Board of Control for Cricket (BCCI), which filed a corporate insolvency plea over an alleged default of Rs 158 crore; the matter is scheduled for a hearing on December 22.
Properties For Sale
In an effort to address the cash crunch, Byju Raveendran has reportedly pledged properties, including an under-construction villa and family members’ homes worth Rs 100 crore.
Two homes owned by Raveendran’s family in Bengaluru and his under-construction villa in Epsilon — the most exclusive gated community in the city, served as collateral for borrowing $12 million, used to pay salaries to 15,000 employees in Byju’s parent firm, Think & Learn Pvt.
The founder has raised personal debts of about $400 million, pledging all his shares in the parent company, adding that the tech founder also ploughed back into the company the $800 million he raised through share sales in the past couple of years.
The recent delay in crediting pending November salaries was attributed to a technical glitch; Byju’s has also been accused of delaying ‘full and final’ settlements for employees laid off earlier this year, with the company citing difficulties in business restructuring.
The revised timeline for settlement payments, provided in a company email, indicates that affected employees were expected to receive their outstanding payments by November 17, with the earlier deadline set for September 15.
The Last Bit, As Byju’s races against time to finalize the Epic sale and secure much-needed financing, the company finds itself at a crossroads and will have to be very careful from hereon.
The reduction in the notice period for employees, job cuts, and the founder’s pledge of personal assets is indicative of the gravity of the situation.
With investors closely watching and a crucial annual general meeting on the horizon, Byju’s future hinges on how well it is able to steer in these turbulent financial waters.
The outcome of the Epic sale, the resolution of pending issues with creditors and regulatory authorities, and the company’s ability to adapt to changing investor demands will ultimately determine whether Byju’s can weather the storm and regain its financial stability and a sound footing in the highly competitive edtech sector.