Byju's secures $250 million funding via structured instruments from Davidson Kempner: Reports

This infusion of funds will provide much-needed support and resources for the startup.

On May 10, Moneycontrol reported that Byju's was preparing to secure a substantial funding round of $1 billion through a combination of equity and structured instruments.

Structured instruments are investment products that are tied to the performance of securities in the market. These instruments have the potential to be converted into shares, often at a discounted rate, during significant events such as an initial public offering (IPO), the report said.

The additional funding secured by Byju's will also enable the company to make a partial prepayment of its $1.2 billion term loan B (TLB) that was raised in 2021, according to Moneycontrol.

Byju's had previously obtained the TLB from a group of investors, making it one of the largest funding rounds for an Indian startup. Concerns surrounding the company prompted certain lenders to request a $200 million prepayment instead of restructuring the loan, as reported by the media.

Byju's has been engaged in negotiations with its lenders to revise the terms of its debt financing arrangements.

As part of the renegotiation, the company has offered to raise the interest rate on its $1.2 billion TLB by 200 basis points (bps).

The infusion of funds will serve as a form of validation for Byju's founder and CEO Byju Raveendran as it comes just weeks after the recent ED searches at its offices under the provisions of the Foreign Exchange Management Act (FEMA).

The discussions on funding come at a challenging period for India's startup ecosystem, which is experiencing one of the worst funding winters in recent times.

Investors have grown more cautious about ed-tech companies due to the decreased demand for online learning following the pandemic.

Byju's, considered India's most valuable startup, has faced major challenges since the beginning of 2022. The company has been embroiled in controversies related to accounting irregularities, allegations of mis-selling courses, and substantial layoffs.

Over the past 12 months, Byju's has terminated more than 3,500 employees. This downsizing was influenced by a combination of diminishing venture capital funding and a decline in demand for online learning services, presenting a dual setback for the company.