The $22b question on Byju’s valuation

Indian edtech behemoth Byju’s has been all over the news lately but not for the right reasons.

Reportedly, the company’s auditor, Deloitte, has yet to approve its 2021 financials, there have been mass layoffs at the firm, its acquisition of Aakash Education has been delayed, and questions are mounting about its revenue model.

And concerns are still piling up for the world’s most valuable edtech company. Yesterday, a report by The Morning Context alleged that a fake investment, amounting to 12 billion rupees (over US$150 million), was made into Byju’s for its previous series F round. This follows a report from last week that a VC firm connected to Indian humanitarian Ravi Shankar allegedly made a fake investment in Byju’s US$800 million round.

While the company denies this allegation and says the funds are coming in, these factors put a spotlight on the edtech giant’s US$22 billion valuation and its plans to go public this year.

Two sources close to the company tell Tech in Asia that Byju’s has pushed back its initial public offering by about nine months to a year and that the company will take a call six months down the line to discuss the issue. The reason for the delay, according to the people, is the current downturn in the market and not the reports that have surfaced.

While that may be true, a company will not want to go public at a time when there is so much uncertainty around its financials and funding.

Even with the delays to its IPO, the biggest question that hangs over Byju’s is its valuation, the largest in the edtech space in India today.

Is Byju’s overvalued?

It all began in May when short-seller Fraser Perring put a short position on Belgium-based investment firm Sofina Group, which is one of Byju’s top investors. Perring said at the time that Byju’s business was “unsound” and “overvalued.” Sofina Group has invested just over US$1 billion in the edtech firm, which represents 12% of its investment portfolio.

Several investors and analysts Tech in Asia spoke to say that Byju’s will see a correction in its valuation in the near future. However, this correction will only be reflected whenever it conducts its next round of funding.

“Since this isn’t the public markets, valuation corrections don’t happen instantly. It all depends on what investors are ready to pay for the company at their next funding round. But in general, Byju’s valuations will see a correction due to the news around it,” said an investor on the condition of anonymity.

One of the sources mentioned earlier tells Tech in Asia that Byju’s has not signed any term sheet under US$22 billion. This confirms that the company will stay at the same valuation until it raises a new round of funding, which could take a long time as it has already raised a war chest of US$6.3 billion to date.

The US$800 million question