Prosus’ Byju’s Stake Valued at Zero by HSBC Amid Financial Turmoil

In a significant blow to the edtech industry, HSBC has assigned a zero value to Prosus’ nearly 10 per cent stake in Byju’s, citing severe financial and legal troubles facing the once-high-flying Indian edtech firm. Prosus, a Dutch-listed technology investment firm, had invested USD 500 million in Byju’s, making it one of its largest bets in India’s burgeoning educational technology sector. However, ongoing cash crunches and multiple legal cases have rendered this investment worthless, according to HSBC’s latest note.

Previously, HSBC had valued Prosus’ stake by applying an 80 per cent discount to Byju’s latest publicly disclosed valuation. This latest valuation marks a stark turn of events for Byju’s, which at its peak was valued at USD 22 billion.

The grim valuation news arrives as Byju’s engages in a controversial USD 200 million rights issue, offered at a 99 per cent discount to its peak valuation. Despite this, founder Byju Raveendran has asserted, “The rights issue is fully subscribed.”

Nonetheless, the National Company Law Tribunal (NCLT) in Bengaluru has ordered that the majority of the capital raised be held in an escrow account amid ongoing disputes with investors, including Prosus. This directive is part of a broader legal battle in which Byju’s has petitioned the Karnataka High Court to remove Raveendran through an extraordinary general meeting.

Byju’s operational difficulties are further compounded by a severe cash crunch. The company’s India CEO, Arjun Mohan, resigned in April, leaving Raveendran to manage daily operations. These internal challenges are mirrored by external legal battles, particularly in the United States, where Byju’s is fighting term loan B lenders over a USD 1.2 billion loan.

On 5 June, a group of lenders petitioned a US court to initiate bankruptcy proceedings against Byju’s subsidiaries Epic, Tynker, and Osmo, which are guarantors for the syndicated term loan.