Edtech startup Byju's to raise $250 mn in Aakash pre-IPO funding

Aakash is eyeing an initial public offering (IPO) and it is looking to raise the capital to create an interim event and set the stage, according to the sources

Byju’s, the world’s most valuable edtech startup, is in talks with existing investors and new investors to raise about $250 million for its tutoring service subsidiary Aakash Educational Services (AESL), according to people familiar with the matter. 

Byju’s has raised total funding of $5.8 billion from investors like Qatar Investment Authority (QIA), Sumeru Ventures, Vitruvian Partners, BlackRock, Chan Zuckerberg Initiative, Sequoia, Silver Lake, Bond Capital, Tencent, General Atlantic and Tiger Global. 

AESL is eyeing an initial public offering (IPO) by next year. It is looking to raise the capital to create an interim event and set the stage. This will be done through the issuance of convertible notes by AESL, according to the sources. 

Byju’s declined to comment on the fundraising activity.

Byju’s acquired AESL in 2021 for $1 billion. The stock-and-cash deal was the biggest in the education space.  It provides comprehensive test preparatory services to students preparing for medical and engineering entrance exams, school and board exams, NTSE, Olympiads and other foundation-level exams. It has over 300 branches across India. 

The pre-IPO round at AESL will help Byju’s to bring in the capital amid a funding winter and steep losses. Byju’s posted losses of Rs 4,588 crore in FY21, 19 times more than the preceding year, according to the latest available financial report. Its acquisition of kids coding firm WhiteHat Jr reportedly contributed 26.73 per cent to the total loss. Byju’s, valued at $22 billion, is targeting to be profitable by March this year.

Last month, Byju’s reportedly handed the pink slip to about 1,000 employees in a fresh round of layoffs, although sources in the company said the move was part of the "optimisation" strategy that the edtech firm had announced last year that included sacking 2,500 workers. 

Early this year Byju’s reportedly sought more time from lenders to renegotiate an agreement governing a $1.2 billion loan that is in breach of covenants, according to people familiar with the matter. Last year in December, a group of creditors of Byju’s told the edtech giant to liquidate its assets in the USA worth about $500-800 million to repay a part of a $1.2-billion loan if the firm is not able to provide the money from its cash reserves, according to sources in the know.