Dutch technology investor Prosus Ventures has decided to write off its entire $530-million investment in Byju’s, marking the end of its support for what was once India’s most valuable startup. This move follows a downturn that has raised concerns about the future of the country’s edtech sector.
In its annual report released on Monday, Prosus stated that it had written down the “fair value” of its 9.6% stake in Byju’s, citing a substantial decline in equity value for investors. The investment incurred a loss of $493 million during the 2023-24 financial year.
Just two years ago, the Dutch investor’s ownership in the online tutoring platform was valued at approximately $2 billion during Byju’s peak valuation of $22 billion. Since then, the company has experienced a significant decline due to various reported operational and financial challenges, including allegations of misrepresentation and substantial unpaid debts.
Nearly one year ago, Prosus reduced its valuation of Byju’s to $5.1 billion, following the resignation of its representative from the board of Think and Learn Pvt. Ltd., the parent company of the edtech firm. Representatives from Peak XV Partners and the Chan Zuckerberg Initiative also stepped down from Byju’s board around the same time.
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In November of that year, Prosus further reduced its valuation of Byju’s to $3 billion.
During Prosus’s earnings call on June 24th, a spokesperson stated, “We remain deeply committed to the education sector, which is experiencing widespread digital adoption globally. However, all three education companies in our portfolio—Stack Overflow, Skillsoft, and Byju’s—have faced performance challenges.” The spokesperson highlighted Byju’s as particularly problematic for their performance over the past year.
Prosus Investment Report
Prosus reported that its investment in Byju’s resulted in a negative internal rate of return (IRR) of 100%. Additionally, US-based Stack Overflow and Skillsoft recorded negative IRRs of 39% and 59%, respectively, according to the firm’s report.
In 2018, Prosus led a $540-million funding round investing $383 million alongside General Atlantic and the Canada Pension Plan Investment Board when Byju’s valuation stood at $3.3 billion.
Over the past year, the relationship between Byju’s and its investors, such as Prosus, PeakXV Ventures, General Atlantic, and Sofina, has deteriorated. They are now pushing to remove Byju Raveendran, who founded the company 13 years ago, from his position as chief executive.
Central to this issue is Byju’s controversial $200-million rights issue, which was priced at a significantly reduced valuation due to financial constraints. This posed a risk of diluting the stakes of many top investors unless they chose to participate. Investors sought greater transparency and supervision of the funds amid accusations of mismanagement by the company’s founders.
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However, the Bengaluru bench of the National Company Law Tribunal has prohibited Byju’s from utilizing the funds raised from its rights issue. Additionally, Byju’s may potentially encounter bankruptcy proceedings in the US related to a $1.2-billion term loan.
Earlier this year, Prosus and other investors convened an extraordinary general meeting of Byju’s shareholders to advocate for the removal of Raveendran.
Subsequent to the meeting, which Byju’s disputes as invalid, Prosus reported that shareholders had approved resolutions addressing “governance concerns, financial oversight, and compliance issues,” restructuring the Think and Learn board, and appointing new operational leadership within the company.
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