Peak XV Informs Limited Partners About Significant Byju’s Markdown Due to Lack of Audited Financials Visibility

• ByStartupStory     |    July 26, 2023

Byju’s, a prominent educational technology company, is facing significant challenges as funding firms Peak XV Partners and Prosus decided to resign from its board of directors. The main reason behind their departure is the lack of transparency and internal controls within the company, leading to a growing disconnect between Byju and its major stakeholders.

Peak XV, previously known as Sequoia Capital India, communicated to its limited partners (LPs), who are investors in their funds, that they would mark down the value of their ownership in Byju’s. The decision to reduce the investment value was driven by the investors’ inability to access updated audited financial statements and their limited influence in implementing corrective actions at Byju’s. While Peak XV mentioned the markdown would happen during the upcoming reporting cycle, they did not provide specific details about the extent of the reduction.

This marks the first instance of investors expressing concerns about financial and corporate governance issues at Byju’s. The company has faced delays in submitting its audited results for the fiscal year 2022 and is currently under investigation by the Directorate of Enforcement and the Ministry of Corporate Affairs. Additionally, Byju has been embroiled in a prolonged dispute with lenders over a USD 1.2 billion term loan.

Prosus, another major investor in Byju’s, has already devalued its holding in the company. As per Prosus’ annual report, the fair value of their less than 10 percent share in Byju’s decreased to USD 493 million as of March 2023, down from USD 578 million in June 2023. This valuation implies a total company value of USD 5.1 billion, much lower than the USD 22 billion valuation it received during its previous equity fundraising.

Notably, key figures like GV Ravishankar from Peak XV, Russell Dreisenstock from Prosus (previously Naspers), and Vivian Wu from the Chan Zuckerberg Initiative have resigned from Byju’s board of directors, expressing concerns over the company’s management, internal processes, governance, and audit practices.

Byju’s financial challenges came to light when it finally disclosed its FY21 financials in September of the previous year, after an 18-month delay. The disclosure revealed a significant loss of Rs 4,588 crore on revenue of Rs 2,280 crore.

Overall, the situation at Byju’s has raised serious red flags for investors, and the company is facing scrutiny and pressure to address the concerns surrounding its financial reporting and corporate governance.

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