Byju’s: Byju’s may have to dip into Epic sale funds to keep lights on

Troubles keep multiplying for Byju’s. As the troubled edtech firm continues to grapple with a severe cash crunch, it may have to explore the possibility of using a portion of the proceeds from the planned sale of its unit, Epic, to sustain operations at Think & Learn, multiple people aware of the matter said.

While Byju’s has received three bids so far for about $400 million for Epic, as per the current plans, the company would have to tap into at least $80-100 million from the transaction while keeping the remainder for term loan B (TLB) lenders.

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However, the critical factor remains the speed at which the deal is finalised, and the funds are transferred even as Byju’s simultaneously explores various avenues for securing much-needed financing. Joffre, a tech-focused buyout firm, is said to be the frontrunner.

Meanwhile, Byju’s also informed employees on Saturday that it is reducing the notice period for all its staffers from 15-60 days to 15-30 days, depending on seniority.

For Level 1 to 3, which includes executives, associates, specialists, senior executives, senior associates, senior specialists and team leads, the notice period would be 15 days, while the same for Level 4 and above would be 30 days. ET has seen a copy of the email sent by the company.

This latest move is also aimed at cutting costs. In September, the company’s newly-appointed India CEO Arjun Mohan started a restructuring that resulted in at least 4,500 job cuts. Currently, Think & Learn is estimated to have around 13,000-14,000 employees.

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Byju’s is implementing multiple desperate measures to stay afloat at a time when the company is slated to hold its annual general meeting on December 20. ET reported on November 29 that investors have demanded, among other conditions, founder Byju Raveendran to ease out of daily operations at the firm.

“At this point, the company needs money. There is a conversation underway with TLB creditors over the Epic sale proceeds and the understanding is about $300-320 million would be reserved for them (lenders),” a person aware of the matter said.

Another person said the company is trying to close the Epic sale at the earliest before global investors proceed on holidays in the run up to Christmas and the New Year.

A spokesperson for Byju’s did not respond to ET’s queries.

ET reported on December 3 that Byju’s had delayed November salaries for about 1,000 employees citing a ‘technical glitch’. The pending salaries were later cleared on Monday.

On November 29, ET reported that top investors in Byju’s had put certain conditions for infusing fresh capital into the company. These include presenting the audited FY23 results as well as easing of control from company founder and chief executive Byju Raveendran in the firm’s day-to-day operations.

Among the agenda for the AGM is Byju’s plan to appoint MSKA & Associates as its statutory auditor for the period of FY23-FY27. It will also adopt and approve delayed FY22 financials. The company only issue a part of its FY22 financials on November 4 to the media showing a 2.3 times growth in standalone revenue at Rs 3,569 crore. Ebitda loss of the core business — financials for which were reported — narrowed to Rs 2,253 crore in FY22, from Rs 2,406 crore in the previous year.

The cash crunch comes at a time when Prosus, one of Byju’s investors, marked down its valuation further to below $3 billion for the fiscal first half. In March, Byju’s was valued by Prosus at around $5.1 billion. Prosus’ representative on Byju’s board Russell Dreisenstock resigned from the edtech’s board in June. Investors like Blackrock have also marked down Byju’s multiple times with the lowest being little over $8 billion.

Separately, on November 21, the Enforcement Directorate (ED) also issued show cause notices to Byju’s and Raveendran for violations involving an amount of Rs 9,362.35 crore under the Foreign Exchange Management Act (FEMA). A week later, the company issued a statement saying it maintains and will continue to maintain complete adherence to all relevant regulations under FEMA.

The Bengaluru-headquatered major has also been dragged to the National Company Law Tribunal by the Board of Control for Cricket (BCCI) in India over a dispute related to sponsorship payment but Byju’s said it is looking to settle the issue.

BCCI has filed a corporate insolvency plea against Byju’s for allegedly defaulting on the payment of Rs 158 crore. The matter is slated to be heard next on December 22. The tribunal issued a notice to Byju’s and asked the company to file its reply within two weeks.