Why is Byju's on a selling spree of its business units?

Benagluru-based EdTech major, Byju’s, made a series of acquisitions on the back of several huge funding rounds since the beginning of 2020. Now, as per reports, it appears that the company is on a selling spree. The company is expected to sell off its US-based kids learning company, Epic! Creations, Inc, for $400 million to Joffre Capital Ltd.

Over the weekend, Byju’s came out with its financial results after a gap of many years. The results highlighted the losses at its parent company, Think & Learn Pvt., narrowing only marginally after an initial pandemic-era boom in business. Now, Byjus's is in advanced talks to sell Epic to find funds to ease its financial pressures.

Byju’s has also reportedly put its higher education platform, Great Learning, up for sale to pay off its term loan B (TLB) lenders. Both the assets combined may fetch Byju’s around $800 million to $1 billion, which will be used to repay the outstanding TLB, according to media reports.

The startup had made a surprise repayment proposal to lenders to pay back the entire $1.2 billion—taken as term loan in November 2021 at a time when interest rates were low—within six months through asset sales. “Since then, interest rates have not only shot up, but relations between the company and its term lenders have also soured. Recently, with regulatory scrutiny over its accounts, Byju’s and its creditors have locked horns over a missed interest payment on the term loan, which the startup had taken to bolster its finances as it went on a spree of global acquisitions during the period of the pandemic,” explained aerospace, space and industry expert Girish Linganna.

Linganna observed that a likely sale of Epic will help Byju’s to raise funds for repayment of the disputed $1.2 billion term loan. “Reports point out that several other bidders, for instance Duolingo Inc., have also expressed interest in buying the EdTech platform, they said on condition of anonymity. Moelis & Co. is running the sale process for Epic, and a deal could be finalized even as soon as this current month. But, since no final decision on the deal has been taken yet, Byju’s could opt to keep the assets for a little while longer. Byju’s representatives Moelis and Joffre, a Chinese-backed tech-focused buyout firm, made no comment and neither did a representative for Duolingo,” remarked Linganna citing media reports.

According to experts, challenging times are far from over for Byju's even if they sell their units. “The cloud of uncertainty around Byju's financials has been doggedly resolved and now there is a semblance of a going concern. That being said, there are still grey clouds on the horizon and open question marks if and when Byju's will be able to draw profits,” said Alok Shende of Mumbai-based Ascentius Consulting.

However, as per a few market experts, the fundamentals behind Byju's EdTech story continue to remain relevant and a huge opportunity lies ahead for the sector. Over time, the focus areas could change and the pedagogy will evolve. However, the sector continues to remain attractive for talent and investors.

“Given the kind of turbulence Byju's has faced till now, it is natural that they are putting their best efforts to optimise their operations on an ongoing basis and bring in greater prudence in everything that they do. It has been challenging to keep the employee morale high. However, given its size and sectoral leadership position, it should be able to steady the ship and move forward,” remarked Aditya Narayan Mishra, MD and CEO of CIEL HR.

Commenting on Byju's selling spree, Mishra said the company is evaluating all possibilities as a part of this optimisation exercise. “Financing the operations and resolving the legacy issues have been on their mind. They might have to let go of some of their precious assets because they are in a tough situation.”