At a time when valuations of tech firms are under pressure, Netherlands-based Prosus NV, a venture capital (VC) investor, has pegged the fair value of its 9.67% stake in Byju’s at $578 million at the end of September quarter. This technically puts the current valuation of the edtech firm at $6 billion, but industry analysts say this is more of an accounting treatment than a markdown. The edtech major was last valued at $22 billion in a deal in October.
“Prosus changed the accounting treatment for Byju’s and in subsequent reporting periods, the company will be accounted for as an investment. The provision of Byju’s audited financials did not align with timing of the close of our financial reporting periods, so we did not have sufficient information to make fair assumptions for our Group’s financial statements,” Prosus said in a statement. “The fair value of the group’s Byju’s investment was determined by a third-party firm,” Prosus added.
In its September quarter results, Prosus has classified Byju’s as a non-controlling financial investment rather an associate, as its shareholding has dropped below 10%. In its H1FY23 financial update, Prosus said that the VC firm lost no longer exerts “influence over the financial and operating policies of the entity”. Byju’s has recently been in the news for multiple rounds of layoffs and for its accounting practices, which received scrutiny from its own auditor.
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Byju’s also came under intense scrutiny from the government and the ministry of corporate affairs (MCA) after its FY21 financials were delayed by almost 18 months beyond the prescribed timeline.
Byju’s reported a loss of 4,564 crore in FY21. The financial statement of he company showed that the company’s net loss swelled to4,564 crore as promotion and employee expenses rose. Revenues dipped 3.3% to Rs 2,428 crore as it deferred about 40% of its revenue to subsequent years due to its new revenue recognition model.
Additionally, Prosus’ investments in edtech, which include 11 portfolios, generated a revenue growth of 178% y-o-y to $334 million at the end of H1FY23. However, trading losses from the edtech increased to $178 million during the half-year accounting period.
“The economic interest results include various one-off adjustments related to our associates Byju’s, Udemy and Skillsoft. Excluding these one-off adjustments, revenue was $290 million and trading losses $116 million,” Prosus added in its H1FY23 financial statement.
Generally, VC firms both globally and in the domestic market have been marking down the fair value of their investments in Indian tech startups as many of their listed peers lost significant market cap in the last few quarters. Experts say that a slowdown in startup funding coupled with a rout in tech stocks in the US and in India may prompt many more such valuation markdowns in the future. Japanese tech investor SoftBank has marked down the internal valuation of around 280 portfolio firm.