Investment giant Prosus has made the decision to write down the valuation of Indian edtech giant Byju’s to below $3 billion. This marks a significant drop from the $22 billion valuation that Byju’s achieved in early 2021. Byju’s is currently facing a number of challenges, and Prosus, along with other backers, is actively working to support the startup in its recovery efforts.
Key Takeaway
Prosus has slashed the valuation of Indian edtech startup Byju’s to below $3 billion, a significant drop from its previous valuation of $22 billion. Byju’s is facing multiple challenges and is working to restructure its operations and reduce costs. The move highlights the need for strategic adjustments in the wake of the company’s pandemic-era growth and mounting losses.
The Steep Decline
The write-down in valuation comes as Byju’s works towards restructuring its operations and implementing cost-cutting measures. The company experienced substantial growth during the pandemic, which resulted in surging losses. This news represents a remarkable turn of fortunes for Byju’s, which has raised over $5 billion in funding to date.
Financial Struggles and Investigations
Byju’s missed its revenue target for the previous financial year and is currently grappling with a debt of $1.2 billion. Additionally, the startup is under investigation by India’s money-laundering agency, the Enforcement Directorate, for alleged violations of foreign exchange laws amounting to $1.12 billion.
Changes in Leadership
In recent months, Byju’s has experienced high-profile departures, including its CFO Ajay Goel, who left after just seven months to return to Vedanta. In addition, auditor Deloitte and three key board members abruptly departed in June. Prosus publicly criticized Byju’s in July for failing to evolve adequately and disregarding investor advice and recommendations.
Adjusting Valuations
Prosus has been actively adjusting the value of its stake in Byju’s for over a year. At the end of March, Prosus valued the startup at $5.1 billion. However, it has now marked down the valuation to below $3 billion, reflecting the challenges faced by Byju’s and the need for strategic adjustments.
Prosus’s Overall Performance
Prosus has also identified Byju’s, along with Indian online pharmacy startup Pharmeasy, as “large underperformers” in its portfolio. The net asset value of Prosus’s e-commerce holdings stood at $29 billion at the end of the first half of the financial year 2024, down from $50 billion two years ago. The investment giant highlighted a decline in the internal rate of return (IRR) from 18% to 5% during the same period.
Despite these challenges, Prosus remains optimistic about its investments in India. The company’s payments subsidiary, PayU, is looking towards an initial public offering in the second half of 2024. Additionally, Prosus noted strong growth for leading food delivery startup Swiggy.
