Byju Raveendran
GAYATRI GANJU FOR FORBES ASIA
India’s embattled edtech firm Byju’s is considering a rights issue for existing investors at a $2 billion valuation, according to a source familiar with the company’s plans. Although it’s a steep 90% drop from the firm’s peak valuation of $22 billion the once high-flying startup had set in July 2022, Byju’s will still view it as a step in the right direction.
Earlier this month, BlackRock had marked down its valuation of Byju’s to $1 billion, and last November, Amsterdam-listed Prosus had slashed the company’s valuation to less than $3 billion.
Byju’s founder, meanwhile, has seen his fortune follow a similar trajectory. At Byju’s peak valuation, Raveendran was estimated to be worth $3.6 billion, but since then, his stake in the startup has crashed through the floor. Forbes now estimates the former billionaire’s net worth has been completely wiped out after accounting for money he borrowed to plough into the company as investors were bailing out. In December, he reportedly pledged his villa that is under construction and his family members’ homes worth 1,000 million rupees to pay salaries to employees.”
Earlier this week, Byju’s posted its long-delayed results for the fiscal year ended March 2022, with the Ministry of Corporate Affairs, which regulates Indian companies. While revenue more than doubled to nearly $700 million, that top-line growth came at a heavy cost to its bottom line. Byju’s net loss widened 81% to more than $1 billion.
Much of that revenue rise was attributed to Byju’s offline test-prep outfit, Aakash Educational Services, and online higher education platform, Great Learning, both of which had been acquired during Byju’s glory days. Roughly 45% of the losses were attributed to its coding unit, White Hat Jr, and Osmo, a U.S. maker of education games.
The fiscal 2022 results had been delayed since September 2022 as the company had to deal with the resignation of Deloitte as its auditor as well as the subsequent resignations of board members representing Peak XV Partners, Prosus, and the Chan Zuckerberg Initiative.
“It sad to see Byju’s becoming a loss-ridden unicorn while valuations shrink from $22 billion to a billion dollars–it’s a lesson for all entrepreneurs,” says Ganesh Natarajan, chairman of digital consulting and investment company 5F World . “The company can still be turned around, but it needs strong leadership to do it.”
To get back on course, Byju’s first needs to deal with an array of pressing legal issues. It’s currently embroiled in a legal dispute with lenders in New York over a $1.2 billion loan, it’s facing an investigation by the Directorate of Enforcement into alleged violations of foreign exchange laws, while also contending with the Board of Control for Cricket in India for allegedly defaulting on sponsorship dues.
In response to the forex investigation, Byju’s said that it “maintains and will continue to maintain complete adherence to all relevant FEMA (Foreign Exchange Management Act) regulations, as verified by comprehensive due diligence conducted by reputable law firms.” Furthermore, the edtech firm’s new auditor—BDO’s audit arm, MSKA & Associates—has not come forward with any evidence of fraud, Byju’s has pointed out.
The auditor reported that “no fraud by the company, nor on the company, has been noticed or reported during the course of our audit,” Byju’s said in a press release.
