Byju’s lenders scrap talks to recast $1.2B loan; Janus Henderson cuts PharmEasy valuation further to $2.7B

Also in the letter:
■ HC refuses to stay probe against Ashneer Grover, Madhuri Jain
■ ETtech Done Deals
■ Meta says inability to transfer data across regions to affect services

Byju’s lenders scrap talks to restructure $1.2 billion loan

Lenders to edtech major Byju’s have pulled out of negotiations with the company to restructure a $1.2 billion loan (perhaps the largest unrated debt raised by a startup), posing a new setback to the firm.

What’s new? The talks with Byju’s creditors were called off after they moved court last month, accusing the edtech major of hiding $500 million of funds, sources told Bloomberg. Lenders can now sell the term loan B securities of the firm as the restraint that came as part of the negotiations has been lifted, they said.

Background: Byju’s Alpha faces a lawsuit over who should control the company. Lenders claim that because of a default earlier this year, they have the right to put their representative, Timothy R. Pohl, in charge. A top manager at Byju’s Alpha “admitted to transferring half a billion dollars out of the company.” However, counsel for Byju’s Alpha said the company was trying to protect the money from predatory lenders.

Options for Byju’s: Though the steering committee of lenders has discontinued the talks, the company will try to reach out to all lenders independently to renegotiate the terms, one of the people said. Byju’s has to make an interest payment on the loan by June 5, the people said.

Byju’s in hot water: ET had also reported last month that Byju’s lenders had sought up to $200 million (about Rs 1,600 crore) in prepayment along with a higher rate of interest from the company as a precondition to restructure its $1.2 billion.

Back home, the Enforcement Directorate (ED) in April conducted searches on several premises linked to Byju’s, as part of a probe into alleged violation of foreign exchange rules over investments it had received and the transfer of funds overseas by the edtech startup.

Recently, BlackRock again marked down the valuation of Byju’s, three months after it first reduced the value of its holdings in the edtech firm, valuing it 63% lower than its earlier $22 billion valuation, at $8.2 billion.

Global asset manager Janus Henderson cuts PharmEasy valuation further to $2.7 billion

PharmEasy founder Siddharth Shah

Global asset management company Janus Henderson has further marked down the valuation of its stake in Mumbai-based online pharmacy PharmEasy’s parent company API Holdings, regulatory filings with the US Securities and Exchange Commission (SEC) showed.

Details: As of March 31, 2023, funds managed by Janus Henderson valued their stake in the startup at $2.7 billion – less than half of the $5.6 billion valuation that was ascribed to PharmEasy at the time of its last fundraise in September 2021.

ET had reported last month that the asset manager had valued the epharmacy company at $2.8 billion as of December 31. The latest valuation markdown was notified to the US securities watchdog in a May 30 filing.

Tell me more: The markdown has come in the backdrop of PharmEasy having breached its loan covenant terms for its high-cost debt from Goldman Sachs, ET reported on Thursday. As per the terms, the company was supposed to raise equity of around Rs 1,000 crore, or about $120 million, linked to its burn rate velocity. It has failed to do that after trying for a year and postponing its initial public offering (IPO).

PharmEasy’s other investor Neuberger Berman also marked the company’s valuation down to $4.4 billion as of February 28.

Valuation markdowns continue: The consumer internet ecosystem in India has been hit by a spate of valuation markdowns amid a severe correction in the technology industry. Valuations of companies such as Meesho, Swiggy, Byju’s, Pine Labs and Ola have recently been slashed by investors such as Invesco, BlackRock, Fidelity, Vanguard, Baron Capital, Neuberger Berman, and Janus Henderson.

Delhi HC refuses to stay probe against Ashneer Grover, Madhuri Jain

The Delhi High Court on Thursday refused to stay the investigation into a complaint filed by fintech platform BharatPe against its former managing director Ashneer Grover and former head of controls, Madhuri Jain Grover.

The court said that no case is made out at this stage “for staying the (Delhi Police) investigation”.

Quick recap: BharatPe filed a complaint with the Economic Offences Wing (EOW) of the Delhi Police in December 2022, after which a first information report (FIR) was registered. The Grovers had moved the Delhi HC seeking to have the FIR quashed, and had sought a stay on the probe in the interim.

What was BharatPe’s complaint? BharatPe had alleged in the complaint that Grover and his family members were indulging in malpractices such as creating fake bills and enlisting fictitious vendors to provide services to the company. Grovers’ counsel in turn said that allegations in the FIR pertained to certain transactions that they conducted in their capacity as the senior management of the fintech platform.

Catch up: This comes a week after Grover informed the court that he has removed social media posts and statements alleged to be defamatory by the Gurgaon-based company. The Delhi High Court had on May 16 asked both BharatPe and Grover to refrain from using unparliamentary language against each other.

ETtech Done Deals

Aneesh Reddy, Founder & MD, Capillary Technologies

Capillary Technologies raises $45 million to fuel acquisitions and expansion: Customer engagement software provider Capillary Technologies has raised $45 million in a mix of equity and debt, as part of a fresh round of funding from a consortium of global investors, amid a funding drought.

Germany’s NexWafe raises Rs 265 crore: Germany-based silicon wafer manufacturer NexWafe GmbH (NexWafe) has raised 30 million euros (Rs 265 crore plus) from a consortium of its current investors, namely Reliance New Energy Limited, Aramco Ventures and Athos Venture GmbH. The new investors include Malcolm Turnbull AC and Keshik Capital, led by Alex Turnbull.

Cooling solutions startup Tan90 raises Rs 11.3 crore: Cooling solutions startup Tan90 has raised Rs 11.32 crore in a pre-Series A investment round co-led by Blue Ashva Capital and Capital A, with participation from 3i Partners and a clutch of angel investors based out of Singapore, the Middle East, and India.

Tweet of the day

Meta says inability to transfer data among regions will affect services to users

In its annual statement, Mark Zuckerberg’s Meta has cautioned that stringent laws around data protection, which may make it impossible for the company to transfer data among its regions, will impact its services and in turn, its financial results.

Driving the news: With many countries such as India and Turkey passing or considering laws implementing data protection requirements, Meta said it could face a higher cost of delivering services to its users.

“If we are unable to transfer data between and among countries and regions in which we operate, or if we are restricted from sharing data among our products and services, it could affect our ability to provide our services, the manner in which we provide our services, or our ability to target ads, which could adversely affect our financial results,” Meta said in an annual statement.

Meta’s legal woes: Meta was recently slapped with a record 1.2 billion euro ($1.3 billion) European Union privacy fine and given a deadline to stop shipping users’ data to the US. The company had been facing investigations and lawsuits in Europe and India as well as other jurisdictions for the 2016 and 2021 update to WhatsApp’s terms of service and privacy policy.

Ray of hope: Founder and chief executive officer Mark Zuckerberg told investors at the annual shareholder meeting on May 31 that the company was seeing signs of its financials improving. Slow hiring, flattening the company’s structure and increasing the percentage of the company that’s technical would go a long way to deliver faster and higher quality work, he said.

Today’s ETtech Top 5 newsletter was curated by Vaibhavi Khanwalkar in Bengaluru. Graphics and illustrations by Rahul Awasthi