Investment giant Prosus has written down the valuation of edtech giant Byju’s to below $3 billion, marking a steep drop from the $22 billion valuation the Indian startup hit early last year. This move comes as Byju’s faces numerous challenges, including restructuring operations and cutting costs after huge pandemic-era growth left it with surging losses.
Challenges Facing Byju’s
Byju’s is facing a plethora of issues that have led to its valuation plummeting. The startup has struggled to meet its revenue targets for the financial year ending in March last year, as disclosed in a much-delayed account this month. Additionally, it is scrambling to resolve a debt of $1.2 billion and is subject to an ongoing investigation by India’s money-laundering agency Enforcement Directorate (ED), which has accused Byju’s of violating the country’s forex law to the tune of $1.12 billion.
Departures and Restructuring
Byju’s CFO Ajay Goel left the startup in less than seven months to return to Vedanta in late October, following high-profile and abrupt departures of auditor Deloitte and three of Byju’s key board members in June. Prosus publicly slammed the Bengaluru-headquartered startup in July for not evolving sufficiently and disregarding the investor’s advice and recommendations despite repeated attempts.
Prosus’ Investment
Prosus has been proactively adjusting the worth of its holding in Byju’s, in which it owns over 9% stake, for more than a year. Prosus valued Byju’s at $5.1 billion at the end of March. This write-down comes as part of a broader trend, with other large investors also taking significant haircuts on their holdings in Byju’s.
Underperforming Portfolios
Prosus identified Byju’s and Pharmeasy, an Indian online pharmacy startup that this year raised capital at a valuation about 90% below its 2021 highs, among the ‘large underperformers’ for the Amsterdam-listed firm. The net asset value of Prosus’ holding of its e-commerce portfolio, which features fintech, edtech, food delivery and venture deals, stood at $29 billion at the end of the first half of the financial year 2024, down from $50 billion during the same period two years ago. The Internal Rate of Return (IRR) fell to 5% in H1 FY24, down from 18% during the same period two years ago.
PayU and Swiggy: Bright Spots
Not all is doom and gloom for Prosus and its vast investments in India. The firm said Wednesday its payments company PayU is now hopeful for an initial public offering (IPO) in the second half of 2024 as its operations expand efficiently. Prosus also touted strong growth for leading food delivery startup Swiggy.
Conclusion
The writing-down of Byju’s valuation to below $3 billion by Prosus marks a significant shift in the fortunes of one of India’s most high-profile startups. The challenges facing Byju’s, including restructuring operations and cutting costs, are a stark reminder of the difficulties faced by edtech companies in the post-pandemic era.
Table of Contents
- Challenges Facing Byju’s
- Departures and Restructuring
- Prosus’ Investment
- Underperforming Portfolios
- PayU and Swiggy: Bright Spots
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