Investor Safir Anand called out the private equity investors who backed Byju's with the Indian education technology company caught in a whirl of trouble and the latest blow coming in the form of the resignations of three board members and auditors.
Reports suggest that the ministry of corporate affairs is looking into the goings-on at the Bengaluru-headquartered company after a spate of resignations. Byju’s has not received any communication from the ministry, the startup’s legal representative said in response to the reports.
Anand shared his thoughts as the quote-tweeted RPG Group chairperson Harsh Goenka on the mounting red flags at the edtech firm, which was valued at around $22 billion in 2023. “Not only Byju, it’s private equity investors seem to think the buck will pass forever under a greater fool theory,” he said.
“Absolutely ridiculous,” said Anand, who is a property lawyer and an investor known for his ability to spot good opportunities in the mid and small-cap space. He is not a Sebi-registered adviser.
Also read: Will Byju’s survive at the end of the day?
Goenka had tweeted his disbelief at the valuation the edtech firm commanded despite its many problems.
He listed 11 such problems: Deloitte auditor quits, audited report of even FY22 not published, the legal case against lender, 3 directors resign, mass layoffs, default on employees PF, White Hat model flawed, post- pandemic education moved offline, many customer complaints, sale of hardware around 80 percent and expected loss they say Rs 10,000 crore.
“If all this is true, what’s the true valuation? $22 bn? Mera dimaag fail ho gaya hai! (It is beyond comprehension),” Goenka said.
Also read: Veteran investor Kanwal Rekhi on Byju's: 'Auditors' resignation typically means...'
To Anand’s tweet on greater fools, First Global chairperson and managing director Devina Mehra said the “greater fool theory” worked in the past.
“The greater fool theory does work for a lot of the time including during the 2021 IPO frenzy! As I had pointed out at the time, most IPOs were at 2-3 times the valuation of the last round with VCs and had large 'offer for sale' components... so VCs did find the Greater Fools,” she tweeted.
The Great Fool Theory is based on the idea that when a company's valuation is no longer based on the fundamentals but on an exaggerated narrative, an investor can expect a "greater fool" or someone willing to buy at a higher price to come along. This is a highly risky investing strategy.
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