Leading investment firm led by Russian billionaire Yuri Milner – DST Global is in advanced talks to invest $400 million in Indian edtech giant – BYJU’S at $10.5 billion valuation. The fundraising talks were initiated when BYJU’S was posed with burgeoning competition from other edtech startups as well as the changes under the National Education Policy 2020.

In June, BYJU’S, the second highest valued startup in India after Paytm, raised an undisclosed amount from US-based BOND Capital at a valuation of $10.5 billion. “BYJU’S is raising this round because there is a large acquisition target in the United States, for which they need cash,” asserts a person aware of the discussions.

BYJU’S, which was initially providing online classes for students from kindergarten to Class 12, recently ventured into live classes, test preparation and entrance exams as well. Founded by former teacher Byju Raveendran, the company has turned to acquisitions to grow and acquired Osmo, a US-based maker of educational games for $120 million, last year.

It has since launched discussions to acquire DoubtNut, a doubt-solving app for school students for $100 million, according to media reports. It is also in advanced talks to purchase WhiteHat Jr, a one-and-a-half-year-old upstart providing coding classes in a $300 million all-cash deal.

BYJU’S is raising this round because there is a large acquisition target in the United States, for which they need cash

“The WhiteHat buyout is done and should be announced soon,” says another person familiar with the matter.

DST Global, is one of the world’s leading late stage technology investors, having pumped money into companies such as Facebook, Spotify, Alibaba, Twitter and Airbnb. For DST, the deal with BYJU’S, if it fructifies, may also mark a comeback of sorts to investing in India. Since September 2016, DST has only invested in Swiggy and Udaan, catapulting both to the coveted unicorn status, or startups valued at over a billion dollars.

This is in contrast with DST’s track record when it began investing in India in 2014-15. Back then, the investor participated in mega funding rounds, pumping close to a billion dollars in cab-hailing firm Ola along with other investors such as Tiger Global and Steadview Capital, and nearly $2 billion along with others in online retailer Flipkart.

BUJU’S has also considered raising a large round of debt to finance some of its acquisitions. It has explored raising up to $500 million in debt, and received interest from some banks and financial institutions, at an interest rate of 2.5 percent per annum.

“Debt is always cheaper than equity and makes sense when you have regular cash flow, so they explored the option just in case the equity round may not work out,” asserts the first person cited above. The company has earlier raised debt, although smaller rounds, from InnoVen Capital and RBL Bank.