In a significant move, financial services giant HSBC has slashed the valuation of edtech company Byju’s to zero, as compared with the company’s valuation of $22 billion in 2022. HSBC in its note said it has assigned zero value to Byju’s stake amid multiple legal cases and funding crunch.
HSBC has assigned zero value to investment company Prosus’ nearly 10 per cent stake worth about $500 million) in Byju’s.
“We assign zero value to Byju’s stake amid multiple legal cases and funding crunch,” according to the HSBC note.
“Previously, we valued around 10 per cent stake in Byju’s by applying an 80 per cent discount to the latest publicly disclosed valuation,” the note added.
Byju’s is struggling to even pay salaries to its employees amid the financial crunch.
“Byju’s is facing multiple headwinds. We and other shareholders are working everyday to improve the situation. We are in close discussions with the company every day,” a senior Prosus executive was quoted as saying in reports late last year.
The crisis has also significantly impacted Byju’s founder, Byju Raveendran. According to the Forbes Billionaire Index 2024, his net worth has fallen to zero. Byju Raveendran’s net worth stood at $2.2 billion (nearly Rs 17,545 crore) the previous year. Forbes noted, “Only four people from last year’s list dropped off this time, including former edtech star Byju Raveendran, whose firm Byju’s was enveloped in multiple crises and its valuation was marked down by BlackRock to $1 billion, a fraction of its peak $22 billion valuation in 2022.”
How Has Byju’s Plunged Into A Crisis? A Short Timeline
2011-2022: Rise to Prominence
Established in 2011, Byju’s quickly gained prominence and became India’s most valuable startup with a peak valuation of $22 billion in 2022. The company revolutionized education with its innovative learning app, serving students from primary school to MBA aspirants.
April 2023: Legal Troubles Begin
In April 2023, Byju’s faced significant legal troubles when the Enforcement Directorate (ED) conducted searches and seized various ‘incriminating’ documents and data, marking a major setback.
May 2023: Valuation Cut by BlackRock
Following these legal issues, BlackRock cut Byju’s valuation to about $8.4 billion.
Financial Year 2021-2022: Unveiling Financial Struggles
The company’s overdue financial results for the fiscal year ending March 2022 revealed a substantial net loss surpassing $1 billion.
November 2023: Further Challenges and Valuation Cut
In November 2023, Byju’s reported trimming its operating losses by 6 per cent in 2021-22 for its core online education business, with revenue more than doubling. However, the Enforcement Directorate issued a show-cause notice for an alleged Rs 9,362.35 crore violation under the Foreign Exchange Management Act (FEMA).
During the same month, tech investor Prosus NV substantially cut Byju’s valuation to under $3 billion, citing the company’s struggle with governance and cash flow problems.
January 2024: BlackRock Slashes Valuation
Finally, in January 2024, BlackRock slashed Byju’s valuation by 95 per cent to $1 billion amid media reports of Raveendran pledging his homes to pay staff, following the exit of several Byju executives and board members due to delays in filing the company’s 2021-22 financial results.
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