Byju’s all set to raise $500 million at $23 billion valuations

Amidst the slowdown and the slew of layoffs in the edtech sector, there is some good news trickling in. At least, it does look like good news for now, although we are yet to get confirmation on the actual expression of interest from potential investors. Back to the basic issue first. India’s leading edtech company, Byju's, is expected to soon raise more than $500 million, or Rs4,000 crore, at an indicative valuation of around $23 billion. While there is no final announcement, this is purely in the form of reports that have appeared in the press.

The news started doing the rounds after it was confirmed that Byju’s and its investment bankers were in advanced talks with two major middle-east based sovereign funds viz. Abu Dhabi Sovereign Wealth Fund  and Qatar Investment Authority. The fund raising would be around $500 million overall, although the structure of the deal or the quantum of split is still not clear. It is not surprising that Byju’s is now talking to the sovereign funds as traditional private equity funds have been going tad slow on funding fresh rounds of Edtechs.

While, Byju's declined to comment on the development, the news on the street is that Byju’s planned to use  the funds to make some big ticket acquisitions in the United States. That is part of a much larger plan that Byju’s has to take up a string of inorganic expansion steps to make the best of the crisis in funding edtech and the likely consolidation in the sector. It may be recollected that, earlier, Byju’s had successfully acquired US-based reading platform Epic for $500 million as well as the US based coding site Tynker for $200 million.

It does look like the appetite that Byju’s has for global acquisitions has not diminished despite the tightness in the edtech funding market. It is also mulling buying out Chegg and has in the past already bought Singapore-based Great Learning for $200 million and Austria's mathematics operator GeoGebra for $100 million. Byju’s is also in talks with US-based edtech firm 2U, which operates platforms like edX offering online courses created by Harvard University, Massachusetts Institute of Technology (MIT), among others.

While there is no doubting the appetite that Byju’s has for global buys, what is raising question marks is the valuations of $23 billion. Remember, Byju’s has a commitment of $250 million investment from Sumeru Ventures and Oxshott, but that money is yet to actually come in. These deals were at a valuation of $22 billion and Sumeru is already of the view that it is too steep. At this stage, getting funding at a valuation of $23 billion does sound quite rich. However, one has to wait and see if the deal really fructifies.

There are also a number of things going positive for Byju’s. Its recent focus on online plus offline delivery of classroom content appears to be working to perfection. Its recent buys of Aakash and Great Learning have fuelled its growth in recent months, with Great Learning achieving 200% growth in international learner base in 2021. Byju's currently has a presence in 120 countries, and reportedly has over 7.5 million paid users on its platform. As per the latest filings, Byju’s has also maintained average retention or renewal rate of 86% annually.

But the primary focus would be to ensure that there are no more embarrassments like the recent order from the MCA to disclose its FY21 results. That is not a great stamp of transparency and future valuations would largely depend on that. Also, Byju’s is still too leader centric and that needs to change. For now, this round of funding would do a world of good for the morale of Byju’s, the investors and for the edtech sector as a whole.