ED's recent searches of BYJU's premises may be seen as a setback for the edtech company, which has been trying to actively raise capital.
According to various media reports earlier this month, BYJU'S raised $700 million in two separate equity and convertible note deals at a flat valuation of $22 billion. The round was led by two West Asian sovereign wealth funds as well as large private equity firms. The fundraiser did not have an official confirmation, however.
It sought to raise $250 million through a convertible note issue of Aakash Educational Services, which it purchased for $950 million in cash and stock last year. According to reports, it was a pre-IPO round intended to resolve cash crunch issues. When Business Line inquired sources close to the matter they said, “Both the deals are on and are progressing.”
According to the search and seizure report from the ED, "various incriminating documents and digital data have been seized" as well as other FEMA violations have been found, this could change the minds of venture capitalists (VCs). BYJU's might have trouble raising funds going forward due to funding winter in the startup ecosystem.
The company had previously raised $250 million from existing investors and Qatar Investment Authority.
In the funding round of $800 million that was announced in March 2022, the company was valued at USD 22 billion. By the end of this month, Byju's aims to turn a profit.
According to the plan, the company laid off 2,500 employees and hired 10,000 teachers for India and other countries.
Debate on projected valuation
Its valuation was, however, disputed after Prosus, the Netherlands-listed investment arm of South African conglomerate Naspers, recorded its 9.67 percent stake in BYJU's as $578 million. This projected valuation is nearly 73 per cent less than the quoted $22 billion valuation.
Byjus reports loss in 2021
Byju's booked a loss of Rs 4,588 crore for 2020-21, 19 times more than that of Rs 231.69 crore in 2019-20. Revenues during the financial year (FY) 2020-21 dropped to Rs 2,428 crore from Rs 2,511 crore in FY20.
The company is yet to release a financial performance report for FY22.
ED, post the search of Think & Learn Private Limited, which runs BYJU’S, revealed that it has received close to ₹28,000 crore in foreign direct investment during the period from 2011 to 2023.
Additionally during the same period, the company has also remitted nearly ₹9,754 crore to various foreign jurisdictions in the name of overseas direct investment. The company has also paid around ₹944 crore for Advertising and Marketing expenses. This also includes the amount remitted to foreign jurisdiction.
According to ED, BYJU’S has not prepared its financial statements since the financial year 2020-21 and is not getting the accounts audited. ED also went on to say that the founder & CEO Raveendaran Byju, remained evasive through the investigation and has not made any appearances.