In a startling setback for edtech giant Byju’s, tech investor Prosus has slashed the startup’s valuation to under $3 billion, marking an 86% decline from its peak valuation of $22 billion just a year ago. The news comes amidst a series of challenges, including cash-flow issues and a contentious dispute with creditors over a $1.2 billion loan. Byju’s, once a shining star in India’s startup ecosystem, is now grappling with financial turbulence, delayed financial filings, and key resignations.
Byju’s rapid expansion during the Covid-19 pandemic fueled its ascent as a prominent player in the edtech space. However, this trajectory has taken a stark turn as the company contends with significant cash-flow problems and the complexities of a loan dispute. Shareholders, including Prosus and Blackrock, have successively devalued Byju’s over the past year, marking a descent from $22 billion to $11 billion in March, $8 billion in May, and $5 billion in June.
Prosus’ Drastic Valuation Cut
In the latest blow, Prosus, during its earnings call, announced a drastic cut in Byju’s valuation to under $3 billion. This disclosure follows Byju’s revelation of a ₹2,250 crore loss and the delayed filing of its 2021/22 financial results by almost a year, prompting resignations from key personnel, including the CFO and CTO.
Amidst the closure of schools and universities during the Covid-19 pandemic, Byju’s embarked on an aggressive expansion strategy, acquiring numerous edtech startups not only in India but also in the US. The company’s substantial spending during this period, coupled with the subsequent slowdown in growth as educational institutions reopened, has contributed to its current financial challenges.
Legal Standoff and Leadership Upheaval
A prolonged legal dispute with creditors, triggered by a breach of covenants on a $1.2 billion loan, has added to Byju’s woes. Founder Byju Raveendran, once celebrated for his rapid rise from tutor to head of India’s most valuable tech startup, now finds himself at the center of scrutiny. The legal standoff has intensified, shining a spotlight on governance issues within the company.
While Prosus did not provide a specific reason for the recent valuation cut, a statement in July hinted at governance concerns. Prosus stated that Byju’s management “regularly disregarded advice,” despite efforts by the tech investor’s former director to improve governance. This raises questions about the internal dynamics and decision-making processes within Byju’s.
Byju’s Legal Woes Extend to Cricket Sponsorship
In an additional legal wrangle, Byju’s, once the official sponsor of the Indian cricket team, is now entangled in a case filed by the BCCI. The cricket governing body has lodged a case against Byju’s parent company over an alleged missed payment of sponsorship royalties amounting to approximately $20 million. This adds another layer of financial strain to Byju’s already challenging situation.
Byju’s, which was once hailed as a symbol of India’s burgeoning startup success, is now navigating stormy financial waters. The drastic reduction in valuation, ongoing legal disputes, delayed financial disclosures, and key resignations underscore the depth of the challenges facing the edtech giant. As the company grapples with these issues, the broader implications for India’s edtech sector and the startup ecosystem as a whole remain uncertain. The unraveling of Byju’s financial saga serves as a cautionary tale in an industry marked by rapid growth and, at times, tumultuous downturns. Only time will reveal whether Byju’s can weather the current storm and reclaim its position as a leading force in India’s tech landscape.