How Prosus Decided to Write Off Its Stake in Byju’s Amid Financial Uncertainty

Prosus, a Dutch-listed tech investment firm, has written off its 9.6 percent stake in financially troubled edtech firm Byju’s. This highlights the ongoing financial challenges of the Indian edtech company.

In its FY24 annual report, Prosus stated that it wrote off the fair value of its stake due to a "significant decrease in value for equity investors." The investment firm mentioned, “A fair value loss of $493 million was recognized in other comprehensive income in the current year.”

Prosus reportedly wrote down Byju’s mainly due to inadequate information regarding the company's financial health, liabilities, and future outlook.

Read: Byju's Challenges NCLT Order on Second Rights Issue in Karnataka HC: Report

Prosus’s investment in Byju's

Prosus is one of the largest investors in the edtech firm, as per data from Tracxn. Since 2019, through multiple rounds, Prosus has poured in $536 million in Byju's. A spokesperson for Byju's reportedly mentioned that they cut their valuation of Byju's because of inadequate information on the company’s financial health, liabilities, and future outlook.

Amidst a looming financial and legal crisis, lower valuations have become a recurring phenomenon for edtech firms. Earlier this year, HSBC, in a report, highlighted that the investment in Prosus no Byju’s has no value. "We assign zero value to Byju’s stake amid multiple legal cases and a funding crunch,” HSBC mentioned in a note. HSBC further added that they valued their approximately 10 percent stake in Byju's by applying an 80 percent discount to the latest publicly disclosed valuation.

Read: NCLT Orders Byju's to Maintain Shareholding Status Quo Amid Controversy

Prosus also reduced the valuation of Byju’s to below $3 billion in November last year. In September, during Prosus’ earnings call, it was said that while they wouldn’t disclose the exact valuation, it was below $3 billion. Similarly, in March, Prosus valued its nearly 10-percent stake in Byju’s at $5.1 billion. Byju’s last official valuation was over $22 billion in October 2022, following a $250 million funding round.

In addition to it, in July, Prosus’ board representative at Byju’s, Russell Dreisenstock, resigned, along with Chan Zuckerberg Initiative’s Vivian Wu and Peak XV Partners’ GV Ravishankar, citing poor reporting and governance structures as reasons for their departure. While mentioning that Byju’s disregarded the advice and recommendations from Prosus, the tech investment firm said that the reporting and governance structure of Byju’s “did not evolve sufficiently for a company of that scale."

BlackRock Reduces Valuation of Byju’s

In January this year, asset management company BlackRock reduced the valuation of Byju’s to $1 billion. This was a 99 percent decrease in valuation for the edtech firm from $99 billion.

Since 2023, there have been three valuation cuts by the company. According to BlackRock’s semi-annual report, the firm, which holds less than 1% of Byju’s shares, has reduced the edtech company's valuation to $1 billion as of October 2023, down from $22 billion in early 2022. Previously, in May 2023, BlackRock had already reduced Byju’s fair value by 62 percent, bringing it to $8.4 billion. TechCrunch first reported this adjustment, noting that it was based on certain disclosures.

Additionally, US asset management company Baron Capital has slashed Byju’s valuation by 99.85 percent to $120 million as of March 31, 2024, according to filings with the US Exchange Commission, first reported by YourStory. Baron Capital holds 15,334 shares through the Baron Emerging Markets Fund and 9,201 shares via the Baron Global Advantage Fund, valuing these investments at $75,485 and $45,294, respectively.

Investors file a case against Byju’s

Along with the mounting trouble, in February this year, a group of four investors, including Prosus, GA, Sofina, and Peak XV, filed an oppression and mismanagement plea against Byju’s in the Bengaluru Bench of the National Company Law Tribunal, NCLT.

The investors were seeking the appointment of a new board and the removal of CEO Byju Raveendran from the company. Amid the allegations of oppression and mismanagement by the company’s shareholders, Byju’s has been restrained by the National Company Law Tribunal from going ahead with the second rights issue.

The first rights issue of the company was raised in January; however, the NCLT prevented Byju’s from using the fund after investors, including Prosus, Peak XV, Chan Zuckerberg Initiative, and Sofina, opposed the fundraise. The $200 million right issue of the company was conducted at a 99 percent discount from the $22 billion valuation of the company.

Byju’s has been engulfed in a deep financial crisis. From layoffs to resignations to a deep financial crunch, the firm has seen it all. In a statement on February 1, Byju’s shareholders said, “We are deeply concerned about the future stability of the company under its current leadership and with the current constitution of the Board.” It remains to be seen what the future holds for the edtech firm.