Byju's Gets $300 Million Rights Issue Commitment Amid Investor Discord; Says Report

Edtech firm Think and Learn, operating under the brand name Byju's, has reportedly secured a substantial $300 million commitment from investors for its ongoing rights issue, according to PTI sources close to the matter. The rights issue, initiated in January with the aim of raising $200 million, is set to close by the end of February. The move comes amidst a challenging period for Byju's, marked by a significant reduction in enterprise valuation and discontent among investors.

Byju's had embarked on the rights issue in January, seeking to raise $200 million through an equity rights offering. The enterprise valuation for this issue is anticipated to fall within the range of $220-250 million, reflecting a 99% reduction from its peak valuation of $22 billion.

PTI sources reveal that Byju's has received a total commitment of approximately $300 million for the ongoing rights issue. While some investors have suggested expanding the issue size, the company's primary focus is to successfully conclude the existing offering. Negotiations are reportedly ongoing with disgruntled investors, who have expressed dissatisfaction and concerns.

The company is actively engaged in discussions with these investors and has reportedly proposed appointing two independent directors to the board as a measure to enhance transparency. However, this move is contingent upon the completion of the rights issue and the declaration of financial results for the 2023 fiscal year.

"Byju's has received a total commitment of around $300 million for the rights as of today. Some investors have also suggested increasing the rights issue size, but the priority for the company is to close the existing issue successfully," explained a PTI source familiar with the matter.

The source further highlighted ongoing negotiations with dissatisfied investors, stating, "Byju's is in discussion with miffed investors also. The company expects that they will also invest, otherwise their shareholding will reduce by almost 50%."

Another source emphasized that Byju's aims to declare the financial results for the fiscal year 2023 in the current quarter, making the company fully compliant with regulations. Following this, the company plans to appoint two independent directors to its board, in line with discussions with disgruntled investors who have called for an Extraordinary General Meeting (EGM) on February 23.

The EGM notice has garnered support from major stakeholders, including General Atlantic, Peak XV, Sofina, Chan Zuckerberg, Owl, and Sands, collectively holding approximately 30% stake in Byju's. Investors, led by Dutch investment firm Prosus, have raised concerns regarding governance, financial mismanagement, and compliance issues in the EGM notice. The resolution also calls for the reconstitution of the Board of Directors.

According to the notice, a consortium of Byju's shareholders had previously requested meetings with the board in July and December, but their requests were allegedly disregarded. It's worth noting that Byju's investors currently lack voting rights on CEO or management changes, as per the shareholder agreement.

Meanwhile, a representative from one of the investor groups calling for the EGM anticipates more investors joining their cause on February 23. Following the EGM, they plan to approach the National Company Law Tribunal seeking the reconstitution of Byju's board.

Despite attempts to reach out to Byju's for comment on these developments, there has been no immediate response.