Why is Byju’s selling its receivables? And what are they?

Why read this story?

Editor's note: There is something unusual happening at Byju’s, India’s largest education technology company, which was last valued at upwards of $20 billion and counts Sequoia, SilverLake, Blackrock, General Atlantic, Tiger Global and the Chan-Zuckerberg Initiative as investors. According to documents accessed by The Morning Context, Byju’s—incorporated as Think & Learn Pvt. Ltd—has been offloading significant chunks of its trade receivables through pass through certificates, or PTCs. A total of eight tranches of PTCs have been sold by the company since 2019. A PTC is a financial instrument, specifically a securitization transaction where an issuer pools illiquid financial assets (like trade receivables) into marketable securities that can be sold to investors. An issuing company, usually a non-banking financial company, issues PTCs which are in the nature of participation certificates that enable investors to take a direct exposure on the performance of the securitized assets. What does that mean? An NBFC could do a securitization transaction where it takes, say, 10,000 loans worth Rs 10 lakh each; it then packages that and sells it to investors. The lender generates immediate cash flows while …