BYJU’S Secures $300M Investor Commitment in Rights Issue

BYJU’S, India’s leading edtech company, has received a commitment of $300 million from investors for its ongoing rights issue, which is expected to close by the end of February. The rights issue aims to raise $200 million at a valuation of $220-250 million, a steep drop from its peak valuation of $22 billion.

What is a rights issue?

A rights issue is a way for a company to raise capital by issuing new shares to existing shareholders at a discounted price. The shareholders have the right to buy the new shares in proportion to their existing holdings, or they can sell their rights to other investors. A rights issue helps a company to raise funds without increasing its debt or diluting its ownership.

Why did BYJU’S launch a rights issue?

BYJU’S launched a rights issue to address some of the challenges it faced in the past year, such as slowing growth, regulatory hurdles, governance issues, and investor dissatisfaction. The company faced allegations of financial mismanagement, compliance violations, and lack of transparency from some of its investors, who called for an extraordinary general meeting (EGM) on February 23 to seek resolution of these issues and reconstitution of the board of directors.

The rights issue also gives BYJU’S an opportunity to reduce its dependence on external funding and improve its cash flow. The company has raised over $3 billion in funding since its inception in 2011, making it one of the most valued startups in the world. However, it also reported a net loss of $174 million in the fiscal year 2022, despite a 150% increase in revenue.

Who are the investors backing BYJU’S rights issue?

According to sources, BYJU’S has received a commitment of $300 million from investors for the rights issue as of date. Some of the investors who have backed the rights issue include Prosus, General Atlantic, Peak XV, Sofina, Chan Zuckerberg Initiative, Owl Ventures, and Sands Capital. Some of these investors have also suggested increasing the size of the rights issue, but the priority for the company is to close the existing issue successfully.

BYJU’S is also in discussion with some of the miffed investors who have not participated in the rights issue yet. The company expects that they will also invest, otherwise their shareholding will reduce by almost 50%.

What are the next steps for BYJU’S?

BYJU’S expects to close its financial results for the fiscal year 2023 in this quarter, which will make it fully compliant with the regulations. The company has also offered to appoint two independent directors to its board to enhance transparency, but only after the rights issue and declaring its results.

The company also plans to continue its expansion plans in India and abroad, by launching new products and services, acquiring new customers and partners, and entering new markets. The company claims to have over 100 million registered users and 6.5 million paid subscribers on its platform.

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