Byju’s plans to raise $500 million through borrowings in US: Report

Online learning startup Byju’s is looking to raise $500 million in the US for new acquisitions, according to a report in the Mint which quoted sources with knowledge of the development as saying.

A part of this money that will be raised through Term Loan B (TLB) borrowings will also be used as working capital.

“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,” one source told Mint.

Term Loan B (TLB) borrowings are given by hedge fund companies who seek higher returns over a longer term of 5-7 years and come with a floating interest rate. Much of the principal and interest on these loans are to be paid on maturity, unlike bank loans which require quarterly payments. As such, these loans are highly attractive for companies that have weak cash flows in the initial phase.

Also read: Byju’s lessons in acquisition: 6 education start-ups in 2021 at $2 bn

“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,” a source told Mint.

As Indian tech companies are showing massive potential for growth and scale following the pandemic, “the TLB market is expected to see some more deals”, the person was quoted as saying.

Online budget hotel and room rental service Oyo had in July raised $660 million through the TLB method to refinance existing debt.

Byju’s on the other hand has been acquiring several top companies in the ed-tech sector. It has bought Great Learning for $600 million, Epic for $500 million, Aakash Educational Services for $1 billion, and Gradeup, all of which cost it more than $2.2 billion. This is seen as a move to completely dominate the ed-tech market.

Byju’s has reported over 100 million registered students and 6.5 million paid subscribers, as of September. Its parent company Think and Learn Pvt. Ltd reported ₹2,380 crore income in 2019-20, up from ₹1,305 crore in the year before. However, its also reported higher losses of ₹262 crore that year, up from ₹8.82 crore in the year before.