Byju’s funding: Abu Dhabi Fund 10X AD, Apollo Global in talks to invest in Byju’s parent company or Aakash

Abu Dhabi-based 10X AD is in discussions with Byju CEO Byju Raveendran about investing in parent company Think and Learn Pvt Ltd or its subsidiary Aakash Education Services (AES), as the edtech firm looks to raise at least $400-600 million, said people familiar with the matter.

10X AD is a fund pool focusing on the structured investment of late-stage technology companies. It was unclear whether 10X AD would lead a consortium of investors in Abu Dhabi consisting of family offices and ultra-high-net-worth individuals, or invest the $15-200 million alone, as the Bengaluru-based firm struggles after coming under scrutiny. The turnaround, which took more than 18 months, involved corporate governance, audit failures, business conduct, poor financial performance and mass layoffs.

Typically, 10X AD bets $30-50 million by itself, but relies on other pools or even institutions like ADQ.

The structured investments have seniority, options and a guaranteed internal rate of return (IRR) to provide “downside protection”, the people said. With this anchor consortium, some other smaller investor groups in the region are expected to join.

Disrupt AD, the venture capital arm of Abu Dhabi-based ADQ, may also double down on its earlier commitments, the people said. Disrupt AD has been an investor in the company since 2021, joining others in a $350 million funding round at a valuation of $16.5 billion, making it the world’s most valuable edtech company at the time.

Qatar Investment Authority is another Gulf investor in the company, which also has backers such as General Atlantic, Sequoia, Silverlake, Sofina, Tencent, Tiger Global, Naspers, and CPPIB. Times Internet, a subsidiary of Times Group, which publishes ET, is also an investor.

Byju’s is also approaching Apollo Global Management, a leading US private equity and alternative asset management group, to provide Aakash with structured funding of US$200-250 million. This could be a discount for the next round, or it could be through a preferred vehicle with a fixed pre-agreed internal rate of return (IRR) and downside protection. Byju initially tried to put Apollo on the parent company’s payroll, but was rejected. Experts say Aakash, which operates a chain of fitness centers, is doing well, with a compound annual growth rate of 40-50 percent.

The industry expects Aakash to post revenue of $430 million in FY23, up from $250 million in the previous year, with positive Ebitda.

Spokespeople for Byju, 10X AD, Disrupt AD and Apollo did not respond to inquiries.

There is no guarantee that any results will result from the discussions. Audit figures for FY22 and FY23 are still not made public or signed off, people familiar with the matter said.

“It’s really unprecedented — how would any investor put money in without baseline audit data?” said one investor who missed out. “Or, one person does deep forensics, which is a three or four month exercise.”

In the absence of audited data, KPMG did a detailed due diligence report for new investors. This is used for financial reference and latest performance updates.

Raising funds in Aakash through a secondary sale of shares will help Raveendran cut his 30% stake in the unit, providing liquidity to negotiate its term loan B (TLB).

Even Blackstone, which has a small remaining stake in Aakash, could exit, they should be selected. Most investors find it difficult to assess or limit their investments, even in subsidiaries, from problems in the parent company. Discussions with TPG fell through for the same reasonthe source said.

“The market will decide whether the company is valued at $11, $16 or $21 billion — times have changed,” said another executive familiar with the matter. BlackRock, one of Byju’s investors, has reduced the value of its holdings The company’s valuation has risen nearly 50 percent, valuing it at just over $11 billion, ET reported last month.

Lenders have sought an upfront payment of up to $200 million (Rs 16 billion) from the Bengaluru-based company, along with higher interest rates, as a precondition for restructuring its $1.2 billion (Rs 96 billion) term loan B, which It is currently under review, said a person with direct knowledge of the matter.

although Byju’s voluntarily hikes rates by around 200 basis points (bps), but has yet to agree on the terms of the advances proposed by lenders, including some U.S. hedge funds, the people said.

Byju’s currently holds $650 million in its overseas accounts and has about 15 billion rupees ($183 million) in liquidity in India, according to people familiar with the matter.

After months of delay, Byju reports loss of Rs 4,588 crore in FY21, up from Rs 2,620 crore in previous fiscal Year. Its adjusted operating income was Rs 2,280 crore, down 48 per cent from the estimated revenue of around Rs 4,400 crore cited in Think & Learn’s unaudited results.

Byju recently appointed former Vedanta executive Ajay Goel as its new CFOThe appointment is a key appointment as Byju’s needs to wrap up negotiations on its $1.2 billion TLB, the largest loan ever secured by an Indian startup.

Goel will work with the founders and senior leadership on strategy, capital planning and financial analysis, the company said. “His strategic thinking and financial acumen will help us create more value for our stakeholders,” Ravindran said in a statement on April 3.