BYJU’S, the prominent tech company, has received a commitment of $300 million from investors for its ongoing rights issue, which is expected to conclude by the end of February. This development comes after BYJU initiated a rights issue in January to raise $200 million through equity rights, with the company’s valuation being marked at $220-250 million. Despite a decline in valuation from its peak of $22 billion, BYJU aims to successfully close the rights issue and strengthen its position in the market.
Investor Commitment and Negotiations:
As of now, BYJU has secured a total commitment of around $300 million for the rights issue. Some investors have also suggested increasing the size of the rights issue, but the company’s priority is to successfully conclude the existing issue. In addition, BYJU is engaged in discussions with dissatisfied investors to encourage their participation in the rights issue. The company hopes that these investors will invest to prevent a reduction of their shareholding by almost 50%.
Appointment of Independent Directors:
To enhance transparency, BYJU has proposed the appointment of two independent directors to its board. However, this appointment is contingent upon the declaration of the company’s financial results for the fiscal year 2023. BYJU aims to finalize its financial results for FY23 within this quarter, ensuring compliance with regulatory requirements. Once the financial results are confirmed, the company plans to proceed with the appointment of independent directors. This proposal is part of ongoing discussions with dissatisfied investors who have called for an Extraordinary General Meeting (EGM) scheduled for February 23. Notably, investors including General Atlantic, Peak XV, Sofina, Chan Zuckerberg Initiative, Owl Ventures, and Sands Capital, who collectively hold around 30% stake in BYJU’S, have expressed support for the EGM notice.
Challenges and Financial Performance:
In recent years, BYJU’S has faced various challenges, including significant losses, obstacles in its business model, conflicts with investors, as well as legal disputes with creditors and vendors. The company is expected to report a total revenue of approximately INR 6,500 crore for the financial year 2022-23, a 23% increase from the previous year. However, the net loss for FY22 surged by 81% year-on-year to INR 8,245.2 crore ($1 billion) due to losses from acquisitions, particularly WhiteHat Jr. Additionally, the startup’s total expenses nearly doubled to INR 13,668 crore in FY22.
Conclusion:
BYJU’S, the leading tech company, has received a substantial commitment of $300 million from investors for its ongoing rights issue, indicating continued investor confidence. The company’s focus is on successfully concluding the rights issue and addressing the concerns of dissatisfied investors through discussions and potential investments. With plans to appoint independent directors and achieve compliance with regulatory requirements, BYJU’S aims to enhance transparency and strengthen its position in the market. Despite challenges and financial losses, the company’s projected revenue growth for FY22-23 demonstrates its potential for long-term success in the tech sector.
-Prisha Jaiswal