Byju’s has hired investment banks to raise a minimum of $ 500 million through B-Term Loans (TLBs) in the United States, as India’s most valuable startup seeks to replenish its war chest with a debt after spending billions of dollars on acquisitions this year, three people familiar with the development said.
The edtech unicorn will primarily use the funds for acquisitions, one of the three said, on condition of anonymity, adding that some of the money raised will also be deployed as working capital.
Institutional investors such as hedge funds, which seek higher yields and can tolerate longer investment horizons than traditional banks, offer such loans, which have characteristics similar to high yield bonds.
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TLBs generally have a variable interest rate, with terms of 5 to 7 years.
Much of the principal and accrued interest must be paid when due, making these loans attractive to fast-growing start-ups with high cash expenses and low cash flow to support quarterly interest payments. required by bank loans.
In July, Oyo raised $ 660 million to refinance existing debt, becoming the first Indian tech company to tap the TLB market.
“Byju’s is working with US investment banks JP Morgan and Morgan Stanley to structure the financing of TLB. They are looking to raise at least $ 500 million, but the deal could be increased depending on demand, ”the first person said.
Emails sent to Byju’s, JP Morgan and Morgan Stanley did not elicit a response.
“US investors are moving closer to Indian tech companies and the TLB market should see more deals. As the Indian tech ecosystem has undergone dynamic change following the pandemic and the creation of dozens of unicorns, Indian tech companies have reached a significant scale to make them attractive to these institutional investors, ”the second person said, also requesting anonymity.
“Given the low interest rate environment in the West and the massive amounts of liquidity with investors, it is absolutely necessary to seek out higher yielding opportunities and India’s big tech companies are a perfect fit for these investors,” he added.
Byju’s has embarked on a wave of acquisitions in recent months, buying the Great Learning higher education platform for $ 600 million, the children’s digital reading platform Epic for $ 500 million and $ 1 billion test preparation provider Aakash Educational Services, in quick succession.
In September, Byju’s online test prep platform acquired Gradeup, marking its eighth acquisition in 2021, spending more than $ 2.2 billion on such purchases since the start of the year.
Earlier this month, Byju raised about ??2,200 crore in a funding round led by Oxshott Venture Fund, The Economic Times reported, citing regulatory documents from the Tofler business intelligence platform.
The funding is part of a larger ongoing fundraiser in which the company is looking to raise up to $ 1.1 billion to $ 1.5 billion, which Mint first reported in August.
As of September, Byju’s had over 100 million enrolled students and 6.5 million paying subscribers.
Think and Learn Pvt. Ltd, which operates Byju’s, reported a jump in its total revenue to ??2,380 crore in the year ended March 2020 from ??1,305 crore the previous year. However, the losses extended to ??262 crores ??8.82 crore the previous year.
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