Byju’s Valuation Freefall: Prosus Faces Edtech Turbulence as Indian Giant Struggles to Recover Amid Investor Scrutiny

  • Byju's Valuation Plunge: Byju's valuation drops from ZAR 418 billion to < ZAR 57 billion, facing operational and financial challenges.
  • Prosus' Intervention: Prosus, with a 9% stake, actively works to aid Byju's recovery amid financial struggles and regulatory scrutiny.
  • Broader Portfolio Impact: Prosus' e-commerce portfolio sees a 42% decrease, Pharmeasy valuation drops, while PayU eyes an IPO.
By Lethabo Ntsoane

In a startling development for the Indian edtech landscape, investment giant Prosus has written down the valuation of Byju’s, a Bengaluru-based edtech giant, to below ZAR 57 billion. This marks a staggering drop from the ZAR 418 billion valuation the startup achieved just early last year. Byju’s, which has garnered significant attention and investment, is now grappling with a series of challenges that have led to this remarkable fall in valuation.

The Valuation Plunge

Prosus, one of Europe’s most valuable tech companies, reported during an earnings call on Wednesday that it has adjusted Byju’s valuation to reflect a significant decrease. Byju’s, once valued at ZAR 418 billion early last year, is now assessed at less than ZAR 57 billion. This drastic reduction raises eyebrows and prompts a closer look at the challenges the edtech giant is currently facing.

ValuationDateSignificance
ZAR 418 billionEarly Last YearPeak Valuation
< ZAR 57 billionNovember 29, 2023Steep Decline

Byju’s Challenges and Prosus Intervention

Prosus Interim Chief Executive, Ervin Tu, revealed that Byju’s is confronting numerous challenges, and stakeholders, including Prosus, are actively working to aid the startup’s recovery. This comes after a period of explosive growth during the pandemic, which, while boosting user numbers, left Byju’s with surging losses and an urgent need for restructuring.

Financial Struggles and Missed Targets

Byju’s, which raised over ZAR 95 billion to date, reportedly missed its revenue target for the financial year ending in March last year. The startup’s financial struggles are further highlighted by its efforts to resolve a debt of ZAR 22.8 billion. This financial setback, coupled with a sudden departure of the Chief Financial Officer Ajay Goel and the exit of key board members, has led to increased scrutiny of Byju’s operations.

Regulatory Scrutiny and Investigation

The troubles don’t end there. Byju’s is currently subject to an ongoing investigation by India’s money-laundering agency, the Enforcement Directorate. The agency has accused Byju’s of violating the country’s forex law to the tune of ZAR 21.3 billion, adding another layer of complexity to the startup’s challenges.

Prosus’ Stance and Ongoing Adjustments

Prosus has been proactively adjusting the worth of its holding in Byju’s for over a year. In March, Prosus valued Byju’s at ZAR 97.1 billion, which has now dropped to less than ZAR 57 billion. Prosus, which owns over a 9% stake in Byju’s, publicly criticized the startup in July for not evolving sufficiently and disregarding the investor’s advice, despite repeated attempts.

Prosus’ Valuation Adjustments in Byju’sValuation (ZAR)Date
Initial ValuationZAR 97.1 billionMarch 2022
Current Valuation< ZAR 57 billionNovember 29, 2023

Byju’s in the Broader Context of Prosus’ Portfolio

Byju’s is not the only setback for Prosus. Pharmeasy, an Indian online pharmacy startup, also faces challenges, having raised capital at a valuation about 90% below its 2021 highs. These “large underperformers,” as identified by Prosus, contribute to a notable decrease in the net asset value of Prosus’s e-commerce portfolio.

Prosus E-commerce PortfolioNet Asset Value (ZAR)ChangeInternal Rate of Return (IRR)
March 2022ZAR 50 billionN/A18%
November 29, 2023ZAR 29 billion-42%5%

The Path Forward: Prosus Highlights Positive Growth in India

Despite the challenges posed by Byju’s and other underperformers, Prosus remains optimistic about its investments in India. The firm revealed that its payments company, PayU, is now eyeing an initial public offering in the second half of 2024, as its operations continue to expand efficiently. Additionally, Prosus highlighted strong growth for Swiggy, a leading food delivery startup in India.

Conclusion: A Rollercoaster for Byju’s and Prosus

The downward spiral in Byju’s valuation reflects the challenges faced by the Indian edtech giant in the wake of explosive growth and subsequent operational hurdles. Prosus, a significant investor in Byju’s, is actively involved in supporting the startup’s recovery, while also addressing challenges in its broader portfolio. As the landscape of edtech and e-commerce in India continues to evolve, the Byju’s story serves as a reminder of the complexities and uncertainties inherent in the rapidly changing tech industry. The coming months will likely be crucial in determining whether Byju’s can navigate these challenges and regain its once-lofty valuation.

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Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted: Email: lethabo@rateweb.co.za Twitter: @NtsoaneLethabo