Byju’s Valuation In Question After Prosus Reclassifies Investment

The reclassification of investment by a significant minority shareholder has raised questions on the valuation of India’s biggest edtech startup.

Prosus NV pegged the fair value of its 9.67% stake in Byju’s operator, Think and Learn Pvt., at $578 million as of September 2022, according to the Amsterdam-listed firm’s for fiscal 2023. That pegs Byju’s valuation at $5.977 billion—a steep discount from $22 billion .

To be sure, Prosus has not exited its investment in Byju’s but merely reclassified it as a non-controlling financial investment rather than an associate. Meaning, “it no longer exerts significant influence over the financial and operating policies of the entity”.

That’s because Prosus now holds less than 10% stake in the company.

“Prosus changed the accounting treatment for Byju’s and in subsequent reporting periods, the company will be accounted for as an investment,” the firm told BQ Prime in an email. “The fair value of the group’s Byju’s investment was determined through by a third-party firm.”

Prosus has recognised a gain on disposal of the associate of $22 million, including a reclassification of accumulated foreign currency translation losses of $55 million, according to the half-yearly report. “The group accounts for its 9.67% effective interest in Byju’s at fair value through other comprehensive income. The fair value of the investment, subsequent to the loss of significant influence, is $578 million,” the report stated.

Since 2018, Prosus has invested a total of $536 million in Byju’s to hold a 10% stake, according to the . It continues to hold a seat on the company’s board of directors.

Byju’s , particularly in fiscal 2021, has raised questions on its standing as India’s most valuable startup.

Think & Learn Pvt., the parent company of Byju’s, reported a net loss of Rs 4,588 crore in FY21. At Rs 2,430 crore, revenue was little changed from the previous 12 months. The edtech startup blamed the performance on changes in accounting practices that led it to defer revenue to subsequent years.

Backed by the Chan Zuckerberg Initiative, General Atlantic and Tiger Global, Byju’s has raised billions of dollars in capital to finance a global acquisition spree in the face of a tech downturn worldwide.

The company, which has 150 million users, has since been plagued by challenges, including a long-delayed filing of audited financial statements and a truncated fundraising this year.

In October, Byju’s said it had raised $250 million from existing investors, led by Qatar Investment Authority. This came after it and Lionel Messi as the brand ambassador for its social initiative. The funding kept Byju’s valuation at $22 billion and its status as India’s most valuable startup.

The company will use the fresh capital to help it become profitable, Byju Raveendran, founder of Byju’s, had said in a statement. “Regardless of the adverse macroeconomic conditions, 2022-23 is set to be our best year in terms of revenue, growth and profitability.”