Baiju cuts valuation in rights issue amid cash crunch | Asks $250M | Tech Crunch

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Byjus, the world's most valuable edtech startup, slashed its valuation by $250 million in a rights issue it launched on Monday as the Indian firm struggles to meet its working capital needs. The startup is looking to raise $200 million in a rights issue, which it says is “necessary to avoid any value impairment”.

The startup is resetting its valuation in a rights issue in which all existing investors are likely to participate, according to a source familiar with the matter. If Byzoo succeeds in raising $200 million, the startup's post-money valuation will be in the range of $220 million to $250 million, a 99% drop from the startup's previous valuation of $22 billion.

In a letter to shareholders on Monday, Baiju founder Baiju Ravindran said the edtech group's founders have invested $1.1 billion in the Bengaluru-headquartered startup in the past 18 months and are seeking continued support from investors.

“We have made enormous personal sacrifices for the company. We have spent our lives building this company and believe deeply in its mission,” Ravindran wrote in the letter seen by TechCrunch.

The rights issue comes as Baiju looks to secure capital amid a severe funding crunch. The startup, which has spent $2.5 billion to acquire more than a dozen companies in 2021 and 2022, has raised more than $5 billion in equity and debt from backers including Peak XV, Lightspeed, the Chan Zuckerberg Initiative, BlackRock, UBS, Process Ventures and B Capital.

“It has been 21 months since our last external capital raise, during which time we have reduced our fire and strived to become a lean organization focused on execution. The board believes that raising the company's capital is imperative to create a glidepath to deliver strong shareholder value,” Ravindran wrote in the letter.

Byjus has been looking for new funding for almost a year. The startup was in the final stages of raising about $1 billion last year, but talks derailed after auditor Deloitte and three key board members pulled out of the startup. Instead, Byjus ended up raising less than $150 million in that round from Davidson Kempner and was forced to repay the full commitment amount to the investor after a technical default on a separate $1.2 billion term loan B.

According to the asset manager's disclosures earlier this month, BlackRock has reduced the value of its holding in Byzoos, reducing the Indian startup's estimated value to about $1 billion in new funding talks.

Byjus is preparing to go public in early 2022 through a SPAC deal that could value the company at up to $40 billion. However, markets went lower after Russia invaded Ukraine in February, forcing Baiju to put its IPO plans on hold, according to a source familiar with the matter. As the market conditions worsened, Byjus's business outlook also improved. The company began to face increasing pressure from investors to address previously unresolved issues.

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