BYJU'S slashes valuation by 99% in desperate funding bid
BYJU'S has cut its valuation as by a staggering 99% in the latest rights issue. Once touted as the world's most valuable edtech start-up, the company is struggling to raise money. BYJU'S is seeking to raise $200 million at a post-money valuation of $225 million, which is 99% lower than the company's valuation of $22 billion in 2022. The edtech giant said fresh funds are "essential to prevent any further value impairment."
Founders have invested over $1bn in last 18 months
BYJU's co-founder and CEO Byju Raveendran disclosed in a letter today that he and other founders have personally invested $1.1 billion into the company over the past 18 months to keep the business afloat. "We have made immense personal sacrifices for the sake of the company. We have spent our lives building this company and are fervent believers in its mission," Raveendran wrote in the letter.
'We have cut our burn and become a lean organization'
"It has been 21 months since our last external capital raise, during which we have cut our burn and worked to become a lean organization, razor-focused on execution. The board believes it is imperative that the company raises capital in order to create a glidepath to deliver strong shareholder value," Raveendran noted in the letter.
BYJU'S rights issue strategy and investor participation
The subscription price for the rights issue, which will remain valid for the next 30 days, has been set at a minimum to allow all existing investors to participate. An investor called the issue "brave" and a smart strategy when the company is facing insolvency rules. BYJU'S expects most existing investors to participate in the round. The company has reduced its monthly burn rate to Rs. 50 crore and aims to achieve operational break-even within the next 2-3 months.
What is rights issue and how is it helpful?
A rights issue is an invitation to a company's existing shareholders to purchase additional stocks and double down on their bet. The issue gives shareholders securities that are called rights. With the rights, the shareholder can buy new shares at a discount in comparison to the market price on a stated future date. It helps a company generate funds which can then be utlised to improvise its financial condition.
BYJU'S finances and ongoing challenges
BYJU'S recently reported a 118% increase in consolidated revenue, from Rs. 2,428 crore in FY21 to Rs. 5,298 crore in FY22. However, its losses also grew from Rs. 4,564 crore in FY21 to Rs. 8,245 crore in FY22. BYJU's faced several challenges since the beginning of 2022, including accounting irregularities, alleged mis-selling of courses, mass layoffs, and dwindling venture capital funding. Raveendran acknowledged these issues in his letter, stating that they have made tough decisions for the company's interest.
