HSBC Determines Prosus’ Stake in BYJU’S As Having No Value

HSBC, a financial firm, has raised significant concerns about the future prospects of the edtech company BYJU’S. They have assigned zero value to Prosus’ nearly 10% stake in the company. This critical evaluation comes as BYJU’S faces continued legal issues and deteriorating financial difficulties. Prosus, a technology investment firm listed in the Netherlands, has injected a substantial sum of $500 million (INR 4,170 Cr) into BYJU’S, marking one of its most significant investments in the Indian educational technology sector.

Related: EdTech Vedantu FY23 Revenue Dips 7.8% With 46% Reduction in Losses

HSBC, in a communication dated May 21, expressed a cautious stance regarding the valuation of BYJU’S stake. Citing ongoing legal matters and financial constraints, the bank opted to assign zero value to BYJU’S stake. Previously, HSBC had valued BYJU’S stake at approximately 10%, applying an 80% discount to the latest publicly disclosed valuation. Moreover, HSBC observed a downward trend in the valuation of several other startups compared to previous estimations.

Recently, Baron Capital Group, a US-based asset management company, has significantly adjusted the fair value of its investment in the edtech firm, marking a reduction of 99.85% to $120 million as of March 31, 2024. Baron Capital holds 15,334 shares through the Baron Emerging Markets Fund and 9,201 shares via the Baron Global Advantage Fund, valuing its investments in BYJU’S at $75,485(INR 0.7 Cr) and $45,294( INR 0.4Cr), respectively.

The challenges confronting the edtech giant are multifaceted, spanning from a looming debt crisis to anticipated mass layoffs, delayed salary disbursements, liquidity constraints, and a litany of legal and insolvency proceedings initiated by its investors and suppliers.

The Chennai branch of the National Company Law Appellate Tribunal (NCLAT) has rejected an appeal submitted by four foreign investors of BYJU’S. This appeal contested the National Company Law Tribunal’s April 23 ruling, which refused to impose an injunction against BYJU’S for allegedly breaching its previous orders.

Concurrently, sources have reported that BYJU’S has drastically slashed the fixed pay for new sales hires by 90%, now tying sales staff salaries to their performance. The new offer letters indicate a fixed pay of INR 1.15 Lakh annually, with variable performance-linked pay reaching up to INR 2.8 Lakh per year.

BYJU’S, an edtech leader, faces challenges as HSBC and Baron Capital Group question its prospects. HSBC’s zero valuation of Prosus’ stake and legal hurdles darken BYJU’S horizon. Prosus’ $500 million injection contrasts with Baron Capital’s 99.85% investment reduction, echoing industry instability. BYJU’S turmoil extends to staff, with a 90% sales salary cut and performance-tied remuneration. Legal clashes and financial woes paint a bleak picture, signaling a turbulent period for the once-promising edtech star amidst a whirlwind of uncertainties.