‘Disappointed with recent developments’, investor Baron Capital cuts BYJU’S valuation

There seems to be no end to Indian edtech firm BYJU’S troubles as Baron Capital, one of its backers, has become the latest investor to slash its valuation, citing events such as the departure of board members and auditor Deloitte.

Baron Capital has cut the fair value of BYJU’S to $13.2 billion, even as the company claims to be valued at $22 billion.

“The weak performance was driven by a marked slowdown in business momentum as COVID-related tailwinds that benefited online/digital education have begun to dissipate,” Baron Capital said in its report.

Baron Capital added that the resignations of Deloitte as its auditor and three investor-appointed board of directors were deemed as material adverse events that required the fair market value of its holdings to be adjusted down accordingly.

Recently, three of BYJU’s board members — Peak XV, Prosus and Chan Zuckerberg Initiative — resigned, mentioning that the company’s reporting and governance structures hadn’t evolved adequately for its scale and that the leadership was consistently disregarding their advice.

This came at the same time as Deloitte tendered its untimely resignation as the company’s statutory auditor, citing a delay by the firm in filing its annual results.

Baron Capital invested in Think & Learn in the second quarter of 2021 as part of a private round of financing. The firm said it is under an NDA [Non-Disclosure Agreement] with the company and is constrained in what it can share with its investors.

Earlier this year, Prosus, which has a 9.6 % stake in BYJU’S, also slashed its fair value to $5.1 billion in June, the second markdown by the investor in less than a year.

Last year, asset management firm BlackRock, which holds a minority stake in the edtech firm, marked down its valuation to $8.4 billion.

Valuation cuts by investors, layoffs, and mounting losses are not the only causes of worry for BYJU’S. The company is also embroiled in a tussle with its $1.2-billion Term B lenders, leading to mutual lawsuits between the lenders and the company. While an August 3 deadline was reportedly set for amending the loan terms, there have been no updates since.

According to media reports, the company is also in talks to resolve a loan dispute with hedge fund David Kemper. The company had secured $250 million in debt in May.

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