HSBC has assigned zero value to Prosus' nearly 10 per cent stake in the embattled edtech firm Byju's, citing severe financial and legal troubles.
Prosus, a Dutch-listed technology investment firm, has invested USD 500 million in Byju's, making it one of its largest edtech bets in India. However, HSBC's latest note revealed that the ongoing cash crunch and multiple legal cases have rendered this investment worthless. Previously, HSBC had valued Prosus' stake by applying an 80 per cent discount to Byju's latest publicly disclosed valuation.
The dismal valuation news coincides with Byju's controversial USD 200 million rights issue, offered at a 99 per cent discount to its peak valuation of USD 22 billion. Founder Byju Raveendran has asserted that the rights issue is fully subscribed.
Nonetheless, the National Company Law Tribunal (NCLT) in Bengaluru has ordered the majority of the capital raised to be held in an escrow account amid ongoing disputes with investors, including Prosus. This directive comes as part of a broader legal battle where Byju's has petitioned the Karnataka High Court to remove Raveendran through an extraordinary general meeting.
Byju's operational woes 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
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