The edtech unicorn will primarily use the funds for acquisitions, one of the three people said, requesting anonymity, adding that a part of the money raised will also be deployed as working capital
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Byju’s has hired investment banks to raise a minimum of $500 million through Term Loan B (TLB) borrowings in the US as India’s most valuable startup looks to refill its war chest with some debt after spending billions of dollars on acquisitions this year, three people aware of the development said.
The edtech unicorn will primarily use the funds for acquisitions, one of the three people said, requesting anonymity, adding that a part of the money raised will also be deployed as working capital.
Institutional investors such as hedge funds, which seek higher yields and can tolerate longer investment horizons than traditional banks, offer such loans, which are similar in characteristic to high-yield bonds.
TLBs typically have a floating interest rate, with tenures of 5-7 years.
A large part of the principal and accrued interest are to be paid on maturity, making such loans attractive for young, fast-growing companies with high cash burns and weak cash flows to support quarterly interest payments as required in bank borrowings.
In July, Oyo raised $660 million to refinance existing debt, becoming the first Indian tech company to tap the TLB market.
“Byju’s is working with American investment banks JP Morgan and Morgan Stanley to structure the TLB financing. They are looking to raise at least $500 million, but the deal could be upsized depending on the demand," the first person said.
Emails sent to Byju’s, JP Morgan and Morgan Stanley did not elicit a response.
“US investors are warming up to Indian tech companies, and the TLB market is expected to see some more deals. As the Indian tech ecosystem has seen a dynamic shift following the pandemic and dozens of unicorns getting created, Indian tech companies have achieved significant scale to make them attractive for these institutional investors," said the second person, also requesting anonymity.
“Given the low interest rate environment in the West and the massive amounts of liquidity with investors, there is a strong need to look for avenues of higher yield and the marquee Indian tech companies are a good fit for these investors," he added.
Byju’s has been on an acquisition spree in the past few months, buying higher education platform Great Learning for $600 million, kids’ digital reading platform Epic for $500 million, and test preparation provider Aakash Educational Services for $1 billion, in quick succession.
In September, Byju’s acquired online test preparation platform Gradeup, marking its eighth acquisition in 2021, spending more than $2.2 billion in such purchases year to date.
Earlier this month, Byju’s raised around ₹2,200 crore in a funding round led by Oxshott Venture Fund, The Economic Times reported, citing regulatory filings sourced through business intelligence platform Tofler.
This funding is part of a larger ongoing fundraise wherein the company is looking to raise as much as $1-1.5 billion, which Mint first reported in August.
As of September, Byju’s had over 100 million registered students and 6.5 million paid subscribers.
Think and Learn Pvt. Ltd, which runs Byju’s, reported a jump in total income to ₹2,380 crore in the year ended March 2020 from ₹1,305 crore in the previous year. However, losses widened to ₹262 crore from ₹8.82 crore in the previous year.
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