Amid a drop in tech valuations due to macro headwinds, Netherlands-based technology investor Prosus recorded the fair value of its 9.67 percent stake in Byju's at $578 million at the end of the September quarter, when it began classifying the edtech company as a non-controlling financial investment rather than an associate as its shareholding fell below 10 percent.
Although Prosus' accounting entry implies that it values Byju's at $5.97 billion, experts say that different shareholders may value a private company differently in their books. Moreover, there may be a substantial difference in how a significant shareholder and a minority shareholder value shares in the same company.
Byju’s was valued at $22 billion in its last funding round in October.
“Macroeconomic conditions have changed in the several months preceding our half-yearly financials, generally resulting in significant declines in company valuations across the technology sector. The fair value of the group’s BYJU’s investment was determined by a third-party firm,” Prosus told Moneycontrol.
"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," it added.
The technology investor said in its 2022 annual report that it had invested a total of $536 million in Byju's since 2018 and held a 10 percent stake.
Prosus is also an investor in Swiggy, Eruditus, Elastic Run, Meesho, Pharmeasy and Urban Company, among others.
The group continues to account for its interest in Byju's as an investment in an associate due to its significant influence on the board of directors.
Byju's lacklustre performance, particularly in FY21, has called into question the valuations of the company and other edtech firms, as investors have become increasingly concerned about their ability to meet revenue projections.
As a result, Byju's recently had to raise $250 million at its current valuation, despite the fact that the macro environment was challenging and some of its peers were having difficulty raising funds. Moneycontrol previously reported that some investors offered Byju's a valuation of $11-12 billion.
Byju's announced a $800 million fundraise in March of this year, with cofounder Byju Raveendran leading the round with a $400 million cheque. Two investors backed out, and Byju's never received approximately $250 million from two previous rounds. Byju’s said that the two investors walked away because of the uncertain macroeconomic environment.
The proposed $800 million was to be raised at a $22 billion valuation. According to an investor with direct knowledge of the matter, Byju's expects its FY23 revenue to exceed $1.9 billion (Rs 15,660 crore), thus the company was able to raise the money at a TTM (trailing twelve months) multiple of slightly more than 11.
Prosus said it retains its board representation in the edtech company.
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