Byju’s Faces Challenges, Prosus Works on Recovery
In a significant development, investment giant Prosus has written down the valuation of edtech giant Byju’s to below $3 billion. This marked a steep drop from the $22 billion valuation the Indian startup hit early last year.
Background:
Byju’s is facing several challenges, including restructuring operations and cutting costs after experiencing huge pandemic-era growth. The startup has raised over $5 billion to date and counts several prominent investors among its backers, including Peak XV, Lightspeed India Venture Partners, Sofina, BlackRock, UBS, and Chan Zuckerberg Initiative.
Valuation Write-Down:
Prosus’ valuation write-down comes as the Bengaluru-headquartered startup works to restructure operations and cut costs. The investment giant has been proactively adjusting the worth of its holding in Byju’s for over a year.
Byju’s Missed Revenue Target, Faced Debt and Investigation
Byju’s missed its revenue target for the financial year ending in March last year, as disclosed by the startup in a much-delayed account this month. The startup is also scrambling to resolve a debt of $1.2 billion and is subject to an ongoing investigation by India’s money-laundering agency Enforcement Directorate.
Key Developments:
- Byju’s CFO Ajay Goel left the startup in less than seven months, returning to Vedanta in late October.
- High-profile departures of auditor Deloitte and three key board members occurred in June.
- Prosus publicly slammed Byju’s for not evolving sufficiently and disregarding investor advice and recommendations.
Prosus’ Adjustments and Performance
Prosus has been proactively adjusting the worth of its holding in Byju’s, where it owns over 9% stake. The investment giant valued Byju’s at $5.1 billion at the end of March. Prosus identified Byju’s and Pharmeasy as ‘large underperformers’ for the Amsterdam-listed firm.
Financial Performance:
- Net asset value of Prosus’ holding in its e-commerce portfolio 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 investment giant reported a fall in internal rate of return (IRR) to 5% in H1 FY24, down from 18% during the same period two years ago.
Positive Developments for Prosus
Not all is doom and gloom for Prosus and its vast investments in India. The firm said Wednesday that 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:
Prosus’ write-down of Byju’s valuation marks a significant development in the edtech giant’s challenging journey. As the startup works to restructure operations and cut costs, investors like Prosus are adjusting their expectations.
