Byju's Fall Reflects Poorly On Its Investors

Byju's says it provides learning programs to over 150 million students. The biggest lesson may be for the Indian education giant's global investors including Prosus (PRX.AS) and Peak XV, formerly part of Sequoia, who watched founder power run amok in a country they have pinned high hopes on, according to Reuters.

The duo in June abruptly quit the company's board and have since complained that management under co-founder Byju Raveendran regularly disregarded advice. But so long as the blowup at the hot startup once valued at $22 billion goes from bad to worse, its backers will struggle to create enough distance.

A feud with lenders is being aired in a U.S. court, and Byju's on Friday accused a group representing 85% of creditors of a $1.2 billion covenant-lite term loan of creating bogus default claims. Meanwhile, U.S. hedge fund Davidson Kempner is reorganising the board of the company's prized test prep business Aakash after it breached terms of a $250 million loan, according to Bloomberg.

For early supporter Peak XV Partners, the mess comes at a sensitive time, hot on the heels of announcing a separation from its U.S. parent. Peak once owned 27% of Byju's and its stake has fallen to 7% per Tracxn data compiled by The Arc, though the group probably earned many times what it invested by selling its stake to later-stage investors.

Amsterdam-listed Prosus was among those buying into Byju's as the valuation skyrocketed; in March it assigned its 9.6% stake a fair value of $493 million, slightly less than it had invested since 2018. India has become a target market for the investment firm, with 123 mentions of the country in its annual report, versus 30 for China where the investor is busy trimming its stake in tech giant Tencent (0700.HK). So the problems at Byju's make success at its other investments, including food delivery outfit Swiggy and online marketplace Meesho, all the more crucial, reports Reuters.