In June, investment firms Peak XV Partners and Prosus announced their resignation from Byju’s board of directors due to a lack of internal controls at the company, indicating increasing gap between Byju’s and its significant owners.
Peak XV (previously Sequoia Capital India) informed its limited partners (LPs, or sponsors of investment funds) last week that the value of their ownership will be reduced. “The marking down of our investments reflects our lack of visibility into Byju’s up-to-date audited financials and our inability to influence (it) to take corrective measures,” the investor explained in the letter.
Peak XV stated that it will be “significantly writing down our investment in the company in the coming reporting cycle,” but did not provide any details on the predicted drop.
This is the first time that investors have raised concerns about financial and corporate governance issues at Byju’s, which has delayed filing of its FY22 audited results, is under investigation by the Directorate of Enforcement and the Ministry of Corporate Affairs, and has been embroiled in a protracted dispute with lenders over a USD 1.2 billion term loan.
Prosus has previously reduced the value of its holding in Byju’s.
According to Prosus’ annual report, the fair value of the global investment group’s less than 10 per cent share in Byju’s was reduced to USD 493 million as of March 2023 from USD 578 million on June 27. This equated to a USD 5.1 billion business valuation for Byju’s, far less than the USD 22 billion given to it during its previous equity fundraising.
GV Ravishankar, a managing director at Peak XV Partners, Russell Dreisenstock of Prosus (formerly Naspers), and Vivian Wu of the Chan Zuckerberg Initiative all stood away from the board last month.
While Prosus owns about 9.6 per cent of Byju’s, Peak XV owns 7 per cent after two rounds of secondary share sales by the venture capital fund during the last three years, according to media reports.
Peak XV informed LPs that Ravishankar resigned from Byju’s board of directors on June 6 due to the fund’s concerns with the company’s management on matters such as internal processes, governance, and audit.
Prosus, which has invested in Indian internet firms such as Swiggy, Meesho, and PharmEasy, stated that it decided to stand away from the board “after it became clear that he (Dreisenstock) was unable to fulfil his fiduciary duty to serve the long-term interests of the company and its stakeholders.”
After an 18-month delay, Byju’s disclosed its FY21 financials on September 14, last year, reporting a loss of Rs 4,588 crore on revenue of Rs 2,280 crore.
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