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Byju’s to sell Epic, Great Learning to repay $1.2 bn loan

The two assets may together fetch Byju’s around $800 million to $1 billion. (REUTERS)
The two assets may together fetch Byju’s around $800 million to $1 billion. (REUTERS)

Summary

The sale will also help Think & Learn Pvt. Ltd, which runs Byju’s, weed out businesses that it does not consider central to its long-term goals

MUMBAI : Byju’s has put up kids’ reading platform Epic and higher education platform Great Learning for sale, three people aware of the development said, as the edtech giant tries to raise money and pay off a $1.2 billion loan it raised in November 2021.

The sale will also help Think & Learn Pvt. Ltd, which runs Byju’s, weed out businesses that it does not consider central to its long-term goals, the people said on condition of anonymity.

The two assets may together fetch Byju’s around $800 million to $1 billion, which will be used to advance the repayment of its outstanding term loan B (TLB), one of the two people said.

Byju’s had paid around $800 million to acquire Epic! Creations Inc. and Great Learning Education Pte. in a mix of equity and cash at the peak of the startup boom in 2021. The cost excludes milestone-based payments, which have not materialized.

“It (Byju’s) also won’t be a Mongol empire anymore. It won’t be a large and unwieldy group," the person said.

A Wall Street investment bank is arranging the sale of Epic, the person said, adding Byju’s has already received a few term sheets and expects to earn around $400-$550 million for the reading platform. Epic is likely to be sold first, the people said, declining to name the potential buyers.

“There will be some profit, maybe not a large one," the first person added, on both assets.

At the time of the purchase, Byju’s intended to build an edtech empire across a student’s entire education cycle—including K12 (Kindergarten to year 12), test preparation, coding and extracurricular activities and professional upskilling. As the edtech boom cooled with the waning of the pandemic, the company will now attempt to reduce debt, focusing on K-12 and offline businesses such as Byju’s Tuition Centres, while running niche profitable businesses around the focus areas.

“This is a market in which financial sponsors are the buyers for consumer internet assets, not strategics. Which means you buy to sell and not buy to keep. So, the perception of value is very different, and you do not unlock the best outcomes as a seller of these assets, however high-quality they may be," said Kashyap Chanchani, managing partner at The Rainmaker Group, a homegrown investment bank focusing on startups and new-age businesses.

The sale of assets also comes when the company is grappling with the rising cost of debt.

A Byju’s spokesperson declined to comment.

Byju’s raised the five-year $1.2 billion loan from overseas investors in November 2021 at a time interest rates were low. Rates have gone up since then, making debt an expensive proposition. Byju’s also failed to fully comply with all the agreed covenants of the loan, which allowed the lenders to negotiate for better terms.

One such breach in covenants was the delay of the company’s FY22 audited financial statements. At the time, Byju’s argued that the breach was only technical as the company was still making interest payments. Matters came to a head in June when the company skipped an interest payment and labelled its lenders ‘predatory’ while taking them to court to challenge a demand for accelerated repayment.

Soon after, both parties returned to the negotiating table, with Byju’s offering to restructure the terms of the loan, offering a higher interest rate. But this did not make progress. “The cost of the loan was becoming too expensive," the second person said. Byju’s has now offered to pay the entire $1.2 billion in the next six months, with a payment of $300 million expected to be made in the next three months, the people cited above added.

Parallelly, the company is also likely to tap new investors for fundraising. “The company may also be able to raise capital from external investors once its accounts are closed," one of the persons added. Byju’s had earlier stated that it expects to file its FY22 financial statements by September 2023 and its FY23 statements by December 2023.

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