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Byju's Puts Epic!, Great Learning On The Block To Settle $1.2 Billion Loan Debts

The edtech had procured Epic! Creations Inc. and Great Learning Education Pte. in a deal valued at approximately $800 million in 2021

Byju's Puts Epic!, Great Learning On The Block To Settle $1.2 Billion Loan Debts
POSTED ON September 12, 2023 10:50 AM

In a strategic move to tackle its burgeoning financial obligations, Indian edtech behemoth Byju's is planning to divest two significant acquisitions from its portfolio: Epic, the kids' reading platform, and Great Learning, a higher education platform. 

To manage its towering financial liabilities, Byju's aims to generate between $800 million and $1 billion from the sale of these assets. This influx of capital is earmarked for the early repayment of the term loan B (TLB) that Byju's secured in November 2021.

Byju's had procured Epic! Creations Inc. and Great Learning Education Pte. in a deal valued at approximately $800 million during the 2021 start-up frenzy. However, it's essential to note that this price tag does not encompass milestone-based payments that have yet to materialize.

Reuters reported that Byju's is engaging the services of a Wall Street investment bank to orchestrate the sale of Epic, and the preliminary discussions have already yielded multiple term sheets. While the potential buyers remain undisclosed, this sale is expected to precede that of Great Learning.

Regarding the financial outcome of these transactions, one source familiar with the matter indicated to the media platform that there might be some profit, albeit not substantial, for Byju's on both assets.

Byju's, the eponymous brand founded by educator Byju Raveendran, initially aspired to create a sprawling edtech empire, encompassing the entire educational journey of students, from K-12 education and test preparation to coding, extracurricular activities, and professional upskilling.

The company got a massive boost during the COVID months when physical schools were shuttered, and online education became the norm. During this period, Byju’s undertook an aggressive inorganic expansion strategy, acquiring several companies in India and overseas. 

However, as the euphoria of the edtech boom waned in the post-pandemic months, the company has had to recalibrate its focus. It now aims to reduce its debt burden and concentrate on K-12 education and offline enterprises such as Byju's Tuition Centres while retaining niche, profitable ventures aligned with its core objectives.

The recent asset sale initiative by Byju's comes at a time when the company grapples with the escalating costs of servicing its debt. The company had procured a $1.2 billion loan from overseas investors in November 2021 when interest rates were favourable to largely service another ambitious acquisition—the Aakash Educational Services chain of coaching classes. 

However, the subsequent rise in interest rates has rendered the debt more expensive. Furthermore, Byju's failed to fully meet the agreed-upon loan covenants, leading to negotiations for more favorable terms.
One significant breach of these covenants occurred when Byju's delayed the release of its audited financial statements for FY22. The company then argued that this was a technical breach since it continued to make interest payments. 

The situation escalated in June when Byju's skipped an interest payment and challenged the lenders' demand for accelerated repayment, characterising them as 'predatory.' Both parties filed lawsuits in the US courts, and allegations were flung all around. 

Subsequently, both parties returned to the negotiating table, with Byju's proposing a restructuring of the loan terms, including a higher interest rate. However, these discussions did not yield progress, leading the edtech to offer a rapid repayment plan of the entire $1.2 billion loan, with an initial payment of $300 million expected within the next three months.

Simultaneously, the company is exploring options to secure fresh investments. According to the Mint, Byju's could potentially attract external investors once it finalizes its financial statements for FY22 and FY23, expected by September 2023 and December 2023, respectively.

Byju's, which was valued at $22 billion in the preceding year, has encountered a series of challenges, including the resignation of its auditor and board members, as well as several of its senior executives quitting the company. Many fingers were pointed at the lack of corporate governance guardrails and injudicious spending in the company, which even saw government officials stepping in at times. Many believed this was also a move to assuage concerns that the downfall of Byju's, which was touted as India's most valued start-up, could have a domino effect on the country's growing start-up sector. 

Byju's could consider selling more assets in the future in a bid to fortify its financial position. However, it remains to be seen how these last-ditch moves influence the trajectory of this once-prominent player in India's edtech landscape.

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