Byju's, an Indian education startup, is facing a severe downturn as investor doubt and financial challenges continue to cloud its future. The company, once valued at $22 billion, has seen its valuation slashed by major investors, including BlackRock and Prosus NV. BlackRock has cut the value of its holding in Byju's by 95%, reducing the company's implied valuation to about $1 billion. Prosus, which owns about 9% of Byju's, has valued the company at 'sub $3 billion'. This significant decrease in valuation comes after Byju's missed its revenue target for the financial year ending in March 2022 and experienced high-profile departures, including its CFO Ajay Goel and auditor Deloitte.
Byju's had been preparing to go public in early 2022 with a SPAC deal that would have valued the company at up to $40 billion. However, the plans were put on hold due to the market downturn caused by Russia's invasion of Ukraine. The company's mishandled attempt to go public led to a significant decrease in its valuation.
In addition to investor doubt, Byju's is facing financial hardships. The company has struggled to raise capital, make payroll, and pay off its debt of over $1 billion. Byju's has undertaken cost-cutting measures, including a $200 million rights issue sold at a 99% discount. The company is also looking to sell its assets, Great Learning and Epic, to help repay the loan. Byju's has completed an audit of all group units and plans to fully repay the $1.2 billion term loan in six months.
Byju's legal issues have further compounded its challenges. The company has faced scrutiny from regulators and allegations of hiding funds and possible foreign exchange violations. Byju's is also facing legal troubles in the US.
Byju's is now facing a court battle as it has moved the Karnataka High Court against the order of the National Company Law Tribunal (NCLT) that restrained it from proceeding with its second rights issue. The second rights issue started on May 13 and was supposed to end on June 13. Byju's has been prohibited from using any funds from the second rights issue. The company is exploring out-of-court settlements with two of its creditors, Teleperformance and Surfer Technologies. Byju's is facing multiple challenges in India and the US, and its value has dropped to zero according to HSBC. The company's fresh plea in the Karnataka High Court is expected to be heard on Monday.
Despite these challenges, Byju's founder and group CEO, Byju Raveendran, remains confident in the company's sustainable and profitable growth. However, the company's ability to overcome its financial challenges and regain investor confidence will be crucial for its future success.