Byju’s, the world’s most valuable ed-tech startup, is seeking to raise as much as $250 million in a convertible note offering from its tutoring services unit, according to people familiar with the matter.

They said the company’s tutoring provider, Aakash Educational Services, will issue notes that will be converted into equity at a 20% discount to the unit’s planned initial public offering listing price and some of Byju’s investors, who are expected to participate in the round.

Aakash’s pre-IPO financing will help the startup whether a liquidity crunch as talks to raise capital at the parent company level are delayed by a lengthy due diligence process. According to Bloomberg, the Bengaluru-based company began talks with bankers late last year to pick an arranger for Aakash’s IPO.

The 30-year-old Aakash, which was acquired by Byju’s in 2021 for about $950 million, operates brick-and-mortar centres that help teens prepare for the tough exams for rankings at coveted schools such as the Indian Institute of Technology. They said discussions to raise money in Aakash began after talks with private equity firm TPG and two Middle Eastern sovereign wealth funds over a parent-level capital increase stalled during due diligence.

Meanwhile, Byju’s, grappling with mounting losses after the pandemic-era boom in online tutoring faded, is in separate talks with creditors to renegotiate a deal involving $1.2 billion in defaulted loans. Founder Byju Raveendran, the son of a teacher and himself a former educator, is working on a turnaround plan for the group, promising to be profitable this year.