 "Prosus writes off 9.6% stake in Byju's, marking $493 million in loss")
Investment firm Prosus announced on Monday that it has written off the value of its 9.6 per cent stake in troubled edtech company Byju’s. The Naspers-owned investment firm cited a “significant decrease in value for equity investors” as the reason for this decision.
This development is indicative of Byju’s severe financial struggles. The edtech firm has seen its valuation dramatically decline, with most financial investors now attributing a value close to zero to the company.
“A fair value loss of $493 million was recognised in other comprehensive income in the current year,” Prosus said in a stock exchange filing in the Netherlands.
Prosus has invested around $500 million in Byju’s over the years, making it one of its significant investments in the Indian startup ecosystem. Other notable Indian startups in Prosus’ portfolio include Swiggy, Meesho, and Eruditus.
Byju’s has experienced a valuation markdown from its early backers, including Prosus, over the past couple of years. The recent $200 million rights issue at a valuation of $225 million represents a 99 per cent discount from its peak valuation of $22 billion. The company’s plummeting valuation has also affected its founder Byju Raveendran, whose net worth has dropped to zero, according to the recently released Forbes Billionaire Index 2024.
The financial troubles have been accompanied by significant departures at the top and board levels within the past 12 months. In October 2023, Chief Financial Officer Ajay Goel left the company, followed by India CEO Arjun Mohoan in April of this year. Last month, Rajnish Kumar and T V Mohandas Pai, who joined Byju’s advisory council in July last year, also announced their departure.
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In a note on May 21, HSBC stated, "We assign zero value to Byju’s stake amid multiple legal cases and funding crunch." Previously, HSBC had valued Prosus’ nearly 10 per cent stake in Byju's at an 80 per cent discount to the latest publicly disclosed valuation.
Adding to its woes, the National Company Law Tribunal (NCLT) recently prohibited Byju’s from proceeding with its second rights issue. In an order dated June 12, the NCLT directed Byju’s to maintain the status quo in its shareholding, effectively pausing the contentious rights issue. Byju’s has since filed a petition with the Karnataka High Court challenging the NCLT order, with the matter set for hearing soon.
Prosus is also engaged in a legal battle with Byju’s in the Karnataka High Court. The edtech firm has filed a petition involving a group of investors in an extraordinary general meeting seeking the removal of CEO Byju Raveendran. These ongoing legal issues are exacerbating the company's challenges, making it one of the most troubled investments backed by Peak XV Partners.
This is not the first time Prosus has written off its investment in a struggling company. Last year, the Dutch investment firm marked down its $38 million investment in the buy now, pay later startup ZestMoney. The Mumbai-based company was later acquired by DMI Group in a fire sale.