Byju's Aakash Educational Services IPO valuation likely to hit $4 billion

May pick the lead bank in 2 weeks and DRHP expected in Jan-Feb

India’s most valuable start-up, online-education giant Byju’s, is finalising plans for a $1-billion initial public offering of its tutoring business Aakash Educational Services, according to people familiar with the matter.

The company is in talks with at least four foreign banks— JPMorgan Chase & Co, Citigroup Inc, Goldman Sachs Group Inc, and Morgan Stanley, as well as Indian banks, including Kotak Mahindra Bank and Axis Bank, as it seeks arrangers for the listing, said one of the people, who asked not to be named discussing confidential conversations. The unit may be valued at $3.5 billion to $4 billion, the person said.
 

Byju’s, co-founded by Byju Raveendran, could pick the lead bank within two weeks, and a Draft Red Herring Prospectus, the document to kick off an IPO process in India, is set to be filed in January or February, the people said. Byju’s aims for the IPO to take place around August-September, they said.
 

The three-decade-old Aakash, acquired by Byju’s for about $950 million last year, runs brick-and-mortar centers to help teenagers prepare for the grueling tests that rank them for entry into coveted schools such as the Indian Institute of Technology. The offline test prep leader has more than 200 centers dotting the country and has ramped up its digital test prep offerings as well. 
 

A Byju’s spokeswoman declined to comment. Representatives for Citig­roup and Goldman Sachs declined to comment, while JPMorgan, Morgan Stanley, Kotak and Axis didn’t imm­ediately respond to req­uests for comment. Citig­roup is among the frontrunners to lead the IPO since it had helped Aakash prepare for a stock-market debut a few years ago. Bloomberg

The plans were shelved and Blackstone Inc. came on as an investor instead. The conversations with bankers were earlier reported by TechCrunch.
 

Aakash’s annual revenue is set to double in the current year ending in March 2023 and its operating margin is about 20%. The strong financials make Aakash stand out among India’s recent IPOs— high-profile but unprofitable tech companies Paytm, Zomato Ltd. and Policybazaar have floundered since their debuts.
 

Meanwhile, Byju’s has put talks over its own stock-market listing on the back burner, said one of the people, as global markets aren’t supportive of fresh technology debuts. Byju’s had been in conversations with multiple special purpose acquisition vehicles for a listing but a global economic slowdown and slumping tech stocks have stalled those plans.
 

A successful Aakash listing could encourage Byju’s to do IPOs for other recent acquisitions too, and higher-education platform Great Learning could be considered next though it’s much smaller in size, one of the people said.