US investor BlackRock slashes Byju's valuation by 95% to $1 billion

In November 2023, Netherlands-based tech investor Prosus NV marked down Byju's valuation to under $3 billion.

Peerzada Abrar reports.

BlackRock has again reduced the valuation of its share in edtech firm Byju’s — this time to about $1 billion, TechCrunch reported on Friday, citing disclosures made by the US-based asset manager.

This is 95 per cent less than its peak valuation of $22 billion in 2022.

The markdown comes at a time when the company is facing a multitude of challenges, including securing fresh capital, delays in financial reporting and legal disputes with lenders.

At the end of October last year, BlackRock said it valued Byju’s shares at about $209.6 apiece, down from the peak of $4,660 in 2022, according to the TechCrunch report.

An email query to Byju’s remained unanswered until the time of going to press.

According to sources, Blackrock’s stake in the company is under 1 per cent and its valuation process varies among investors.

This is not the first time that BlackRock has marked down its investments in the edtech firm.

Last year, BlackRock reduced the valuation of its share in Byju’s to about $8.4 billion, according to its filing with the Securities and Exchange Commission (SEC) for the March quarter.

Before that, BlackRock had reduced the start-up’s valuation to $11.5 billion (as of December 31,2022).

It joined Byju’s capitalisation table at a $12-billion valuation in 2020.

In April 2022, BlackRock was valuing its shares of Byju’s at nearly $4,660 per unit, valuing the company at about $22 billion.

However, BlackRock reportedly marked down the value of its shares in Byju’s to $2,400 per share at the end of December 2022.

BlackRock is not the only investor which has been marking down its investment in the beleaguered edtech company.

In November 2023, Netherlands-based tech investor Prosus NV marked down Byju’s valuation to under $3 billion.

Prosus owns a 9.67 per cent stake in Byju’s.

The disclosure was made by interim Chief Executive Officer (CEO) Ervin Tu during Prosus earnings call. In November 2022, Prosus had cut down Byju’s valuation to $5.9 billion.

In 2023, a director of Prosus stepped down from Byju's board.

Lifting the veil on what prompted the resignation of its director from Byju’s board, Prosus, one of the earliest and largest investors in the edtech company, later said that the Indian firm’s executive leadership “regularly disregarded advice and recommendations relating to strategic, operational, legal, and corporate governance matters” despite repeated efforts.

Prosus had said Byju’s reporting and governance structures “did not evolve sufficiently for a company of that scale”. Russell Dreisenstock of Prosus stepped down from Byju’s board in June, along with G V Shankar of Peak XV Partners (formerly Sequoia), and Vivian Wu of Chan Zuckerberg Initiative, amid questions over the company’s financial position and corporate governance practices.

Byju's auditor, Deloitte Haskins & Sells, also resigned due to the company’s delay in filing financial results.

Last year in August, US-based asset management firm Baron Capital Group nearly halved the fair value of India's most-valued start-up Byju's in its books.

This happened following the resignations of its auditor and three key investor board members, according to the investor's June quarter report.

In its April-June quarterly report, Baron Capital cut the valuation of Byju's to $11.7 billion as of 30 June. This was down 44.6 per cent from $21.2 billion as of 31 March.

Byju’s attained a valuation of $22 billion in March 2022, after it raised $800 million from investors with founder and chief executive officer Byju Raveendran contributing half of it.

The company has garnered $5.8 billion in total funding from investors such as General Atlantic, Sofina, Qatar Investment Authority (QIA), Sumeru Ventures, Vitruvian Partners, BlackRock, Chan Zuckerberg Initiative, Sequoia, Silver Lake, Bond Capital, Tencent, and Tiger Global.

Byju’s is scouting for more funding which is expected to help the cash-strapped firm meet financial commitments, run company operations, and settle legal disputes with lenders, according to the sources.

It is also facing the challenge of significantly reducing its losses to establish a sustainable business model for the long term.

In November 2023, Byju’s chief financial officer (CFO) Ajay Goel quit the firm and returned to his previous company Vedanta Ltd.

The seasoned global finance professional was hired in April to strengthen the company's financial operations, long-term business strategies, and path to profitability.

In January this year, Byju’s general counsel Roshan Thomas resigned from the company amid a string of senior-level exits at the firm over the past few months.

An alleged lack of internal control of how the firm manages its resources and accounting practices was a major topic of discussion during the company’s annual general meeting (AGM), held virtually on December 20.

The meeting was attended by close to 60 shareholders.

They pressed Raveendran for more transparency on the company financials and its latest state of affairs, according to sources.

Byju’s parent, Think & Learn, faced consolidated losses of about Rs 8,245 crore in FY22, according to the financials presented to the shareholders.

This is an increase from the Rs 4,564 crore in the previous period.

WhiteHat Junior, a coding startup acquired by Byju’s in 2020 for approximately $300 million and which had to be written off, has been a significant contributor to the losses, according to sources.

The firm earned consolidated revenues of over Rs 5,015 crore for the year, an increase from the Rs 2,280.2 crore in FY21.

However, the firm missed the target revealed in September 2022, where it projected its gross revenues to grow to Rs 10,000 crore in FY22.

The firm is going through a restructuring exercise undertaken by Arjun Mohan, who was recently elevated as chief executive officer (CEO) of its India business, replacing Mrinal Mohit, according to the sources.

It also announced new leadership changes in its finance function with the appointment of industry veteran Pradip Kanakia as the senior advisor and Nitin Golani, as India chief finance officer (CFO).

Think and Learn reported a 2.3-fold increase in its core business, achieving an income of Rs 3,569 crore for 2021-22, up from the Rs 1,552 crore in the prior year.

The ebitda (earnings before interest, tax, depreciation, and amortisation) loss of the core business decreased from Rs 2,406 crore to Rs 2,253 crore, with a margin improvement from -155 per cent to -63 per cent, from FY21 to FY22.

The company’s financials are based on an “unqualified financial year 2022 audit, indicating the auditor’s approval of its financial reporting.

Previously, the company aimed to become profitable by March 2023.

However, it reported losses of Rs 4,588 crore for FY21, 19 times greater than those in the previous year.

The firm which has delayed submitting its FY22 results to the Ministry of Corporate Affairs (MCA), is expected to file the financials to MCA soon.