Byju's Fair Value Cut As Adverse Events Leave Baron Capital 'Disappointed'

Baron Capital has reduced the fair value of Think & Learn Pvt., the parent company of Byju's, after the American investor flagged recent "adverse events" at the edtech behemoth.

Baron Capital invested in Byju's in the second quarter of 2021 as part of a private round of financing. As of June 30, it valued Byju's at about $13.2 billion, which is lower than the company's claims of being valued at about $22 billion.

"Byju’s announced that Deloitte had resigned as its auditor and would be replaced by BDO. Three investor-appointed board directors also resigned during the quarter. These developments were deemed material adverse events that required the fair market value of our holdings to be adjusted down accordingly," it said in its June quarter report.

Byju's performance was driven by a marked slowdown in business momentum as Covid-related tailwinds that benefited online and digital education have begun to dissipate.

However, the investor said that Byju's is "well positioned" to benefit from structural growth in online education services in the country.

"While we are disappointed with recent developments, we continue to believe that Byju’s remains a dominant franchise and can sustain low to mid-20s earnings growth in coming years," it said.

It also disclosed that it has signed a non-disclosure agreement with Byju's and is "constrained in what we can share with our investors".

Apart from the adverse events cited by Baron Capital, Bengaluru-based Byju's has been facing several headwinds over the past year. Valuation cuts by prominent investors, searches by the Enforcement Directorate, mass layoffs, and delayed financial results have also marred the startup.

Baron Capital also marked up the fair value of its holding in Pine Labs, a fintech that builds merchant solutions. In May this year, it slashed the fair value of Bundl Technologies Pvt.—the owner of Swiggy—by 34% to about $6.3 billion, down from $9.5 billion.