Education technology company Byju’s, once India’s highest-valued startup at over $22 billion, has seen its valuation plummet to below $3 billion, according to major investor Prosus, a recent TechCrunch report reveals. The staggering 86% write-down of Byju’s value comes as the company struggles to restructure its business amid surging pandemic-era losses.

Prosus, a global investment firm spun out of South Africa’s Naspers, disclosed the markdown during an earnings call on Wednesday. Byju’s is facing “significant challenges,” according to Prosus interim CEO Ervin Tu. He assured that Prosus and other backers are working closely with Byju on recovery efforts. This news marks the latest dramatic shift for the high-flying edtech startup.

A bad bet

Byju has raised over $5 billion in funding to date from prominent investors including Lightspeed India Venture Partners, Chan Zuckerberg Initiative, and others. However, it missed its revenue target for the 2022 fiscal year by a wide margin based on recently published accounts. It also holds approximately $1.2 billion in debt that must be resolved. An ongoing investigation by India’s Enforcement Directorate agency has accused Byju’s of forex regulation violations.

Operational struggles at Byju’s have been mounting. Chief financial officer Ajay Goel departed abruptly in October after less than 7 months on the job, returning instead to Vedanta Resources. This followed earlier exits by auditor Deloitte and three board members. In July, Prosus chastised Byju publicly for disregarding advice and failing to evolve its business model.

Prosus has been reducing the carrying value of its 9% plus ownership stake in Byju’s for over a year as troubles brewed. At the end of March 2022, it marked down Byju’s to $5.1 billion from over $22 billion at its peak. The latest write-down takes it below $3 billion.

Alongside Byju’s, Prosus called out its investment in Indian online pharmacy Pharmeasy as another major underperformer. These two companies were key factors in the decline in value of Prosus’ Ecommerce portfolio to $29 billion currently, down over 40% from $50 billion two years ago. Returns on Indian investments specifically have dropped off steeply.

The picture isn’t entirely negative, however. Prosus highlighted meal delivery service Swiggy and payments provider PayU India as bright spots with strong growth potential. PayU India may launch an initial public offering in 2024 based on positive momentum. But the reversal of fortune for former high-flyers like Byju’s serves as a warning on frothy valuations and scaling challenges for India’s startup market.

Featured image: By RPSkokie, CC BY-SA 4.0, via Wikimedia Commons

Radek Zielinski

Radek Zielinski is an experienced technology and financial journalist with a passion for cybersecurity and futurology.