Prosus significant markdown for Byju’s and PharmEasy
Prosus has significantly reduced the valuation of Indian edtech giant Byju’s to below $3 billion, a sharp decline from the $22 billion valuation it achieved early last year.
The substantial 86% write-down in Byju’s valuation is attributed to the challenges the startup is facing, prompting Prosus and other backers to collaborate in supporting the Bengaluru-based company’s recovery efforts.
Byju’s is undergoing operational restructuring and cost-cutting measures after experiencing substantial losses from pandemic-induced growth; despite having raised over $5 billion to date, Byju’s missed its revenue target for the previous financial year and is grappling with a $1.2 billion debt issue.
An ongoing investigation by India’s Enforcement Directorate also accuses Byju of violating forex laws.
Key stakeholders in Byju’s include Peak XV, Lightspeed India Venture Partners, Sofina, BlackRock, UBS, and the Chan Zuckerberg Initiative.
The startup has witnessed high-profile departures, including its CFO Ajay Goel and the abrupt exits of auditor Deloitte and three key board members.
Prosus, which owns over a 9% stake in Byju’s, has been consistently adjusting the valuation of its holding for more than a year; as of March, Prosus had valued Byju’s at $5.1 billion.
Prosus, one of Europe’s leading tech companies, identified Byju’s and Pharmeasy (an Indian online pharmacy startup) as “large underperformers” in its portfolio.
PharmEasy – Turbulent Waters
Pharmeasy had recently raised capital at a valuation approximately 90% lower than its 2021 highs.
During the first half (H1) of the financial year 2023-24, online pharmacy leader PharmEasy emerged as the top underperformer in the Indian portfolio of investment giant Prosus.
According to Prosus’ financial statements, PharmEasy recorded an internal rate of return (IRR) of -41% in H1 FY24, making it the second-largest underperformer globally for Prosus, with only Skillsoft reporting a worse IRR during the same period.
Prosus disclosed in a shareholder presentation that it held a 13% stake in PharmEasy at the end of September 2023, indicating an increased stake during the review period.
However, despite this, Prosus devalued PharmEasy’s worth due to the startup’s financial challenges. A Prosus spokesperson explained that the devaluation, approximately $118 million, was prompted by PharmEasy’s necessity to raise funds to settle debts. Prosus expressed confidence in PharmEasy’s future by participating in the funding round.
PharmEasy recently raised approximately $424 million in a rights issue, which Prosus also joined. The rights issue was oversubscribed, as reported by PharmEasy co-founder Dhaval Shah, and aimed to address a portion of the company’s outstanding debt.
Prosus Dwindelling Investments
The net asset value of Prosus’ e-commerce portfolio, covering fintech, edtech, food delivery, and venture deals, declined from $50 billion to $29 billion over the past two years.
The internal rate of return (IRR) also fell to 5% in the first half of the financial year 2024, down from 18% during the same period two years ago, according to the investment giant’s financial results.
Prosus reported profitable returns from other Indian companies in its portfolio, including Swiggy, Eruditus, PayU India, Meesho, and Elastic Run. Swiggy yielded a profitable IRR of 7%, Eruditus 22%, and positive returns of 30%, 32%, and 31% from PayU India, Meesho, and Elastic Run, respectively, during H1 FY24.
Despite these successes, Prosus faced an increase in its operating loss, rising from $329 million in the year-ago quarter to $415 million in H1 FY24. The surge in losses was attributed to an impairment loss recognized in relation to edtech investments.
Prosus Expansive Portfolio
Prosus is a global technology investment firm with a diverse portfolio spanning various sectors within the technology and internet space.
Originally part of Naspers, Prosus was established as a separate entity to house Naspers’ international assets with a primary focus on investing in and managing technology companies, operating on a global scale and has become one of Europe’s most valuable tech companies.
Prosus’s investment portfolio includes holdings in a wide range of industries, such as e-commerce, online marketplaces, food delivery, fintech, and education technology. Notable investments in its portfolio encompass well-known companies like Tencent, Swiggy, Byju’s, and many others.
Prosus is known for its strategic approach to identifying and investing in high-potential tech ventures, often playing a key role in the growth and development of these companies.
The firm actively engages with its portfolio companies, providing them with financial support, strategic guidance, and resources to help them scale and succeed in the competitive tech sector.
The firm’s investments span emerging markets, and its activities contribute to the evolution of industries and services that profoundly impact the digital economy.
