Tech investor Prosus made a big move by valuing its stake in the struggling edtech giant Byju’s at zero. This move, which was revealed in Prosus’ FY24 annual report on June 24, highlights the growing difficulties the Indian edtech company is facing. Prosus, which had owned an effective 9.6% share in Byju’s, has also reported a $493 million loss on its investment in fair value.
Byju’s Investment Value Plummets to Zero
Prosus’s decision to write down Byju’s investment to zero stems from worries about the financial transparency of the edtech company. “We have impaired Byju’s down to zero at the end of FY24. We have written down Byju’s primarily because we have inadequate information on the company’s financial health, liabilities, and future outlook,” a Prosus spokesperson explained. This dramatic markdown also reflects in Prosus’ internal rate of return (IRR) on Byju’s, which is now a dismal -100%.
Legal Challenges and Governance Issues
The write-down coincides with a slew of court cases involving Prosus and Peak XV Partners, two of Byju’s investors. These investors are challenging a number of actions made by Byju’s management, including a contentious rights issue that poses a serious risk to the substantial diluting of existing shareholders’ stakes. Prosus emphasises the need for better leadership while maintaining optimism for Byju’s future in spite of these obstacles. “We are seeking protection of our rights and all shareholders. The key for us is to change the governance of the company,” stated Prosus’ management in a post-earnings call.
Massive Valuation Decline and Rights Issue Controversy
Byju’s, which was once valued at over $22 billion in October 2022, is now raising $200 million through a rights issue at a staggering 99% discount to its last valuation. The National Company Law Tribunal (NCLT) has intervened, ordering Byju’s not to utilize the funds from this rights issue until the court resolves the matter. Earlier, in H1 FY24, Prosus had already marked down Byju’s valuation to under $3 billion, indicating an 86% drop from its peak valuation.
Struggles in the Edtech Sector
Prosus has other problematic edtech endeavours outside its investment in Byju’s. Additionally, the business owns sizeable shares in Skillsoft and Stack Overflow, both of which have underperformed. “Edtech continues to be a very interesting area for us. However, our businesses have not performed as expected. Byju’s has been an important contributor to our challenged performance in the last year,” Prosus admitted.
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