Byju’s looks to raise $500 million debt for more acquisitions: Report

Image: Shutterstock

Edtech unicorn Byju’s looks to raise at least $500 million in debt to expand its acquisitions and use a part of it as working capital, Mint reported citing three people aware of the matter.

Citing the above sources, the report added that Byju’s has already hired investment banks like JP Morgan and Morgan Stanley to raise the debt through Term Loan B in the US.

Term Loan B are long-term loans extended by institutional investors like hedge funds and have similar characteristics as that of high yield bonds. They usually have floating interest rates and mature after 5-7 years. A large part of the interest is paid at the time of maturity making it an ideal way to raise loans for fast growing companies with high cash burns and low cash flows unlike bank borrowing where interest is due regularly.

“Byju’s is working with American investment banks JP Morgan and Morgan Stanley to structure the TLB financing. They are looking to raise at least $500 million, but the deal could be upsized depending on the demand," the first person cited above said.

“US investors are warming up to Indian tech companies, and the TLB market is expected to see some more deals. As the Indian tech ecosystem has seen a dynamic shift following the pandemic and dozens of unicorns getting created, Indian tech companies have achieved significant scale to make them attractive for these institutional investors," the second person told the publication.

“Given the low interest rate environment in the West and the massive amounts of liquidity with investors, there is a strong need to look for avenues of higher yield and the marquee Indian tech companies are a good fit for these investors," he added.

Moneycontrol could not independently verify the report.