According to a recent SEC filing by BlackRock, their stake in Indian edtech giant Byju’s has been estimated to be worth nothing. This significant write-down has made Byju’s a striking example of a startup‘s decline in recent times. At one point, Byju’s was valued at $22 billion, making it the most valuable startup in India. However, in the past year, the Bengaluru-based company has faced numerous challenges, causing it to fall short of its projections and ultimately leading to a steep drop in its value.
One of the major issues that Byju’s has faced is its inability to meet its financial reporting deadlines. This, coupled with governance issues and the sudden resignations of its auditor and board members, has resulted in the company being unable to secure a $1 billion funding round. In fact, one of Byju’s biggest investors, Prosus, publicly criticized the company for disregarding their advice on a regular basis. In a move to alleviate the funding crunch, Byju’s managed to raise $200 million this year, but the investment is currently being disputed by some of its largest investors.
It is no surprise then, that BlackRock has now reassessed its valuation of Byju’s to be worth, quite literally, nothing. This is not the first time that BlackRock has marked down the value of their investment in Byju’s. Last year, in October, the asset manager had already reduced the valuation of the company to around $1 billion.
As a result of this valuation adjustment, HSBC, in a research note, has stated that Prosus’ stake in Byju’s, which currently stands at 10%, is now so minimal that they have chosen not to assign any value to it at all. However, the bank has clarified that this does not necessarily mean that the stake is worth nothing; rather, they are refraining from assigning a value. In fact, when looking at their chart (see below), they have still marked a value of zero in the estimated value column, indicating a significant decrease in value.
Sum-of-the-parts valuation by HSBC. Image: HSBC
- This decrease in value is also reflected in Prosus’ stake in other startups such as Meesho, Pharmeasy, ElasticRun, and Stack Overflow. HSBC notes that due to a recent correction in similar edtech and SaaS companies’ public sector multiples, they have applied a 50% discount to the latest funding round or acquisition price for these assets.
“We apply a 50% discount to the latest funding round/acquisition price for assets where the last round is older than six months to account for the recent correction in similar edtech/SaaS companies’ public sector multiples,” HSBC stated in their research note.
It is important to note that this valuation by HSBC is only for Prosus’ stake in Byju’s and does not reflect the company’s overall value. However, it does highlight the significant decrease in value for both Byju’s and its investors. As for BlackRock, they have chosen not to comment on the matter, and Byju’s has also declined to make a statement.
It seems that Byju’s, once a rising star in the Indian startup scene, is now facing a tumultuous period, with constant challenges and battles for survival. Only time will tell if the company can turn things around and regain its status as one of the leading edtech giants in India.
