Finance company HSBC has expressed serious doubts about the future of Indian edtech giant Byju’s and assigned zero value to Prosus’ nearly 10% stake in the company. This harsh assessment was made by Zhu Worshiping. Whose ongoing legal battles and growing financial woes have contributed to this outcome. Prosus is a Dutch listed tech investment firm.
In a note to investors, HSBC pointed out various factors that pushed its expectations down. They had previously valued the shares at a steep discount, reflecting concerns. However, there are more legal disputes and limited cash now.
Byju is also funded by Prosus with $500m worth of shares and is currently embroiled in multiple lawsuits. Recently, Byju issued a $200M rights issue which was subscribed at 1% of its peak valuation fueling more investor fears. Although Byju claimed it was fully subscribed. Most of the funds raised had to be escrowed due to proceedings before National Company Tribunal (NCLT).
Adding fuel to the fire, Byju’s sued Prosus and other investors for the removal of CEO Raveendran. The Karnataka High Court is hearing this case.
Financial distress
Byju’s financial situation appears dangerous as the company faced cash crunch prompting its India CEO exit; day-to-day operations rest with Founder Byju Raveendran himself.
Furthermore, in the US Byjus faces a law suit over $1.2bn indebtedness under term Loan B lenders group. A consortium of lenders has allegedly asked an American court to commence bankruptcy proceedings against a subsidiary of Byju’s that acted as guarantor on this loan;
