The New York-based investment firm invested in structured equity using convertible notes, which allows investors to lend to the startup and the option to convert the loan into equity in the future.
Edtech major Byju’s has raised $250 million in a fresh funding round from US-based investment firm Davidson Kempner, said a person directly aware of the development. The fresh round is part of a $700-million fundraise, which is pegged at a flat valuation of $22 billion.The New York-based investment firm invested in structured equity using convertible notes, which allows investors to lend to the startup and the option to convert the loan into equity in the future.
They typically have a maturity of five years post which the note would be repaid or converted into equity shares. FE reported earlier that the edtech firm is currently in the process of raising $700 million, including from international investors. It is also mulling a `8,000-crore IPO for its subsidiary, Aakash Educational Services, which was acquired by Byju’s for $1 billion in 2021.The fresh funding also comes at a time when Byju’s has been under the Enforcement Directorate’s (ED’s) radar for alleged violation of Foreign Exchange Management Act (Fema). According to ED’s statement late last week, the investigation was initiated based on complaints from various individuals. It said the company’s founder and CEO Raveendran Byju allegedly failed to appear during the investigation despite multiple summons.
According to reports, ED has also reached out to Byju’s lenders seeking more information on the edtech firm’s existing term loan and other related transactions.However, Byju’s large funding comes as a relief to the company since it has been working on repayments of a large $1.2-billion term loan B (LTB) with a five-year tenure that it secured in November 2021. In December last year, a group of lenders that participated in the term loan offering renegotiated the terms of the debt, including faster repayment of part of the loan.Byju’s has raised more than $5 billion to date. Its last significant fundraise was a $250-million funding round from Qatar Investment Authority (QIA) at a flat valuation of $22 billion in November 2022 in which a few private equity investors participated.
In March 2022, it had raised funds worth $800 million from Sumeru Ventures, Vitruvian Partners and BlackRock.Raveendran had also participated in the March fundraise round with a personal investment of $400 million. However, the funding by Sumeru and another investment firm, Oxshott Capital Partners, amounting to $300 million, reportedly did not conclude. The founder confirmed last month that the $300 million in funds was, in fact, withdrawn by the investors.Byju’s has recently been in the news for multiple rounds of layoffs and for questionable accounting practices that received scrutiny from its own financial auditor. Byju’s also came under intense scrutiny from the government and the ministry of corporate affairs (MCA) after its FY21 financials were delayed by almost 18 months beyond the prescribed timeline.
The company filed its FY21 results in September 2022, reporting that its net loss rose to Rs 4,588 crore from Rs 231.69 crore in FY20. The company’s total revenues during the year saw a marginal decline of 3.32% to Rs 2,428.39 crore. The huge jump in losses during the year was due to the deferral of 40% of revenues to subsequent years, but costs not getting deferred.
