Byju Raveendran, founder and CEO of Byju’s is in talks with various international and domestic banks to raise $400 million as a loan to fund 50 per cent of the $800 million (about Rs 6,000 crore) funding round of the edtech giant, according to people familiar with the development. They said this move is part of the company’s strategy to show the founder’s confidence in the firm as he is leading the round and help shore up investor interest at a time when the valuations are under stress globally.
Sumeru Ventures, Vitruvian Partners, and BlackRock also participated in this $800 million round, taking the Bengaluru-based company’s valuation to about $22 billion from $18 billion earlier, according to people familiar with the matter.
“Raveendran is in discussion with various international and domestic banks to raise $400 million as a loan against shares. This may help him to shore up investor interest at a time when valuations are under stress,” said a person. “It is a confidence-building measure to show that the founder is leading the funding round and also tell the existing investors ‘not the worry about the valuation’.”
After committing $400 million, which the company termed as ‘personal investment,’ Raveendran’s stake in the firm has jumped from 22 per cent to about 25 per cent, according to the sources.
“He might be getting this loan at a favorable interest rate,” said another person. “Besides pledging the shares he might have also provided personal guarantee and collateral to the banks to raise this loan.”
Byju’s, the world’s most valuable edtech company, is focusing on expanding its business in global markets and exploring more acquisitions. It has 150 million learners globally. The firm is also in talks with Churchill Capital to raise $4 billion and go public through the special-purpose acquisition company (SPAC) route. The round, if successful, could more than double its valuation to about $48 billion, sources said.
Last year in October, Byju’s had raised about $300 million as part of a larger round of new investment from investors such as Oxshott Venture Fund and Edelweiss Private Investments Trust. The funding had valued Byju’s at $18 billion, up from the $16.5 billion valuation in June last year.
In June 2021, Byju’s became India’s most valuable unicorn, surpassing fintech company Paytm’s $16 billion valuation and which later went for an initial public offering (IPO).
Byju’s is planning to go public this year in the US, according to the sources. But India is also a strong option. It may do a primary listing in the US and a secondary listing in India or vice-versa. Both the US and India are large and key markets for it.
The firm expects to hit revenues of $3 billion for the calendar year 2023, according to people familiar with the matter. It has already crossed revenues of about $1.5 billion.
Byju Raveendran is not the only tech entrepreneur who has raised loan to fund one’s own firm. In 2019, Japan-based banks like Nomura and Mizuho, were funding OYO Hotels and Homes’ founder and CEO Ritesh Agarwal’s $2 billion loan. OYO Hotels and Homes had said Agarwal, will invest $2 billion in the hospitality startup. Agarwal, who founded the hotel chain in 2013 at the age of 19, made this investment through RA Hospitality Holdings (Cayman). He had signed a $2 billion primary and secondary management investment round and was supported by global institutional banks and his financial partners and was subject to regulatory and shareholder approvals.
The company had said that its strong growth, improved margins, superior improvements in customer experience were behind this move. This made it one of the first founder and executive-led management purchases in the technology and hospitality sector, globally. Lightspeed Venture Partners, and Sequoia India, OYO’s early supporters, were selling part of their holdings in order to help the founder increase his stake, and thereby commitment, while remaining invested significantly in the company’s long-term mission.
Last year in December, IPO-bound mobility platform Ola, said it has successfully raised $500 million via a Term Loan B (TLB) from marquee international institutional investors. The Bhavish Aggarwal-led Ola said the proposed loan issuance received a staggering response from investors with interest and commitment of approximately $1.5 billion. A term loan provides borrowers with a lump sum of cash upfront in exchange for specific borrowing terms. Term loans are commonly granted to small businesses that need cash to purchase equipment, a new building for their production processes, or any other fixed assets, according to experts.