Till Debt Do Us Apart

Running out of capital runway, Byju's has turned to venture debt financing to keep the lights on at the edtech. Will this working capital infusion help it become profitable or will it get caught in a debt spiral?

- Vinita Bhatia

When in doubt, turn to debt. That seems to be the mantra for a growing number of start-ups looking to raise capital. Last month, Think & Learn, which runs the edtech decacorn Byju's, raised $250 million from Davidson Kempner Capital Management, a US-based investment firm. This is part of an ongoing $1 billion funding round which it hopes to close soon.

This funding comes when the Indian edtech giant faces several headwinds. In April 2023, Black Rock, which has less than 1% in Byju's, slashed the value of its investment by nearly 50%. The US-based asset manager pegged its per-share value at $2,400 in December 2022, down from $4,600 in April 2022.

In the same month, global investment group Prosus put the fair value of its 9.67% stake in the edtech at $578 million. This slashes the valuation of the edtech major to around $6 billion from the $22 billion valuation last year.

Recently, Bloomberg reported that Alpha, Byju's non-operating holding company in the US, was sued by its lender, Glas Trust Company, which claimed the former had defaulted on a $1.2 billion loan. The lawsuit against Alpha, Byju's director Riju Raveendran and Tangible Play Inc alleges that the company also hid $500 million from its lenders and transferred it out.

Calling the accusations of hiding the money "bewildering", Byju's stated that though it did transfer the funds to other operational entities, this act did not "contravene any Credit Agreement". Instead, it claimed that the money was transferred to other operative entities for growth and expansion in its global operations.