The troubled Indian ed-tech company Byju is again in the news. For the third time in the previous 14 months, Amsterdam-listed investment firm Prosus reduced the value of its 9.6% ownership in Think & Learn, the Bangalore-based edtech company, putting Byju’s valuation at less than $3 billion. That represents a decrease from $6 billion in September 2022, when Prosus first marked it down, and from its second markdown of $5.1 billion in March, which was more than 40% lower.
Byju is now valued at $3 billion, an 86% decrease from its peak of $22 billion in July 2022. Prosus, a media company based in South Africa primarily owned by Naspers, revealed its most recent information on Wednesday during its results call for the quarter that concluded on September 30.
After subtracting debts, the 18% ownership held by Byju’s founder, former maths instructor Byju Raveendran, is currently valued at $100 million. This is significantly less than his highest net worth of $3.6 billion in July 2022, which was $475 million in March 2023. With a $1.8 billion wealth, the previous billionaire debuted on Forbes’ list of World Billionaires in 2020.
“We’ve written Byju’s down by a further $315 million. So our effective valuation on Byju’s is sub $3 billion overall,” Prosus’ CFO, Basil Sgourdos, said during the earnings call.
Since 2018, Prosus, most recognized for its ownership of digital firms like Tencent, has contributed $536 million to Think & Learn.
“We still believe edtech as a theme offers substantial promise, but we know well we have some fixing to do,” said Ervin Tu, Prosus’ group chief investment officer, during the call.
Various industry watchers view the valuation decline in different ways.
The chairman of digital consultancy and investment firm 5F World, Ganesh Natarajan, claims that the valuation reduction is “appropriate.” He states, “They must create and present a profitable business plan with room for growth.”
K Ganesh, a serial entrepreneur, views things differently.
“It is a fact that tech companies like Byju’s were valued at stratospheric levels during the pandemic, and currently, the whole sector is trading at a deep discount to those highs,” says Ganesh, who cofounded online education company TutorVista, which he then sold to global education major Pearson. “But I would not ascribe too much significance to this $3 billion valuation. No transaction is taking place at this valuation. Other investors in the cap table may well ascribe a completely different valuation to their company.”
For example, over the previous 18 months, Byju’s value was cut twice by the global asset-management behemoth BlackRock, to $11.5 billion in October and again to $8.4 billion in May.
Byju faces numerous difficulties, including losses, layoffs, and a government investigation into possible foreign currency irregularities.
It finally revealed its much-awaited fiscal 2022 financial figures at the beginning of November, apart from subsidiaries such as Aakash Educational Services, an offline test prep company, standalone sales more than quadrupled to 35.7 billion rupees (about $430 million) while losses decreased to 22.5 billion rupees from 24 billion rupees the year before.
On November 21, Think & Learn, and Byju Raveendran received “show cause notices” from India’s Directorate of Enforcement, a government agency looking into violations of foreign exchange. The notices were issued “for a violation involving an amount of Rs. 9362.35 Crore” (93.62 billion rupees) under the country’s foreign exchange law, FEMA.
The clarification that “the queries received in the notice are solely technical in nature” was provided by Byju in a statement on Wednesday.
“This is being clarified to dispel any misgivings about wrongdoing about the receipt of FDI or allotment of shares,” the announcement continued.
As confirmed by thorough due diligence by respectable law firms, the statement continued, “We want to reassure you that Byju’s maintains and will continue to maintain complete adherence to all relevant FEMA regulations.”
Byju’s parent company has faced numerous difficulties, such as the resignation of three board members and an auditor in June and a legal dispute surrounding a $1.2 billion debt.
However, some encouraging things have happened. An advisory committee led by former State Bank of India chairman Rajnish Kumar and former Infosys director and CFO T. V. Mohandas Pai was established by Byju in July.
Healthcare magnate Ranjan Pai demonstrated his trust in November by investing $170 million in test outfit subsidiary Aakash Educational Services, which enabled Byju to repay a debt obtained from international investment management firm Davidson Kempner.
