Byju Raveendran.
Troubled Indian edtech firm Byju’s is in the spotlight again. Amsterdam-listed investment company Prosus wrote down the value of its 9.6% stake in Think & Learn, the parent company of the Bangalore-based edtech company, for the third time in the past 14 months, pegging Byju’s valuation at under $3 billion. That’s down from $6 billion in September 2022 when Prosus marked it down for the first time and over 40% lower from its second markdown to $5.1 billion in March.
At $3 billion, Byju’s is down 86% from its peak valuation of $22 billion in July 2022. Prosus, majority-owned by South African media giant Naspers, made its latest disclosure on Wednesday during its earnings call for the six months ended September 30.
The value of the 18% stake held by Byju’s founder, former math tutor Byju Raveendran, is now estimated at $100 million, after deducting loans – down from $475 million in March 2023 and well below his peak net worth of $3.6 billion in July 2022. The former billionaire debuted on Forbes’ World Billionaires list in 2020 with a fortune of $1.8 billion.
“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.
Prosus, best known for its stake in internet companies like Tencent, had invested $536 million in Think & Learn since 2018.
“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.
Industry observers have different takes on the valuation drop.
Ganesh Natarajan, chairman of digital consulting and investment company 5F World, says the slashing of the valuation is “appropriate.” “They need to develop and articulate a business model that has both growth and profitability,” he says.
Serial entrepreneur K.Ganesh has a different interpretation.
“It is a fact that edtech 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 instance, global asset-management giant BlackRock had also slashed Byju’s valuation twice in the past 18 months – to $11.5 billion in October and then to $8.4 billion in May.
Byju’s is dealing with a wide array of challenges – ranging from layoffs to losses to a government probe alleging foreign exchange violations.
In early November, it released its much-delayed financial results for fiscal 2022. Standalone revenue (not including subsidiaries like offline test prep outfit Aakash Educational Services) more than doubled to 35.7 billion rupees (about $430 million) while its losses narrowed to 22.5 billion rupees from 24 billion rupees the previous year.
Meanwhile the India’s Directorate of Enforcement, a government agency which investigates violations of foreign exchange laws, had tweeted on November 21 that it had issued “show cause notices” to Think & Learn and Byju Raveendran “for violation involving an amount of Rs. 9362.35 Crore” (93.62 billion rupees) under India’s foreign exchange law – FEMA.
Byju’s issued a statement on Wednesday clarifying that “the queries received in the notice are solely technical in nature.”
The release further stated that “this is being clarified to dispel any misgivings about wrong doing in relation to receipt of FDI or allotment of shares.”
The statement went on to say that “we want to reassure you that BYJU’S maintains and will continue to maintain complete adherence to all relevant FEMA regulations, as verified by comprehensive due diligence conducted by reputable law firms.”
Byju’s parent has been hurtling from one challenge to another including the resignation of an auditor and three board members in June and a legal tangle over a $1.2 billion loan.
But there are some positive developments. In July, Byju’s set up an advisory council comprising former chairman of Indian banking giant State Bank of India, Rajnish Kumar, and former CFO and director of IT giant Infosys, T. V. Mohandas Pai.
Also in November, in a show of confidence, healthcare tycoon Ranjan Pai invested $170 million in test outfit subsidiary Aakash Educational Services, allowing Byju’s to settle a loan taken from global investment management firm Davidson Kempner.