Blackrock downgrades the valuation of Byju’s and Swiggy

Think & Learn Pvt., the parent company of Byju's, is in the news from last six months of the Balance sheet, as the companies auditor Deloitte not approved the financial of 2021 because of certain revenue recognition practices. Byju’s has 150 million registered users, has since been plagued by challenges, including a long-delayed filing of audited financial statements and a truncated fundraising this year.

India’s most valuable startup has reported a net loss of Rs 4,588 crore in FY21. At Rs 2,430 crore, revenue was little changed from the previous 12 months. Till about a year back, one would mostly hear of its big-bang acquisitions and an unquenchable thirst to raise funding. The edtech startup blamed the performance on changes in accounting practices that led it to defer revenue to subsequent years.

Backed by the Chan Zuckerberg Initiative, General Atlantic and Tiger Global, Byju’s has raised billions of dollars in capital to finance a global acquisition spree in the face of a tech downturn worldwide. But the the real problem started when there are issues like the year-long delay in filing of FY21 annual report, a large number of layoffs, and fundraising issues spooked the stakeholders.

In October, Byju’s said it had raised $250 million from existing investors, led by Qatar Investment Authority. This came after it effected layoffs and appointed Lionel Messi as the brand ambassador for its social initiative. The funding kept Byju’s valuation at $22 billion and its status as India’s most valuable startup.

Some of the biggest Indian startups are taking a haircut in their valuations, at least in the eyes of their investors, as some backers adjust their estimates amid the weakening global economy. BlackRock has cut the valuation of Byju’s, which is India’s most valuable startup at $22 billion, by nearly half to $11.5 billion.

In another report, the most valuable company into online food delivery platform Swiggy, startup at $10.7 billion, has been marked down to a valuation of about $8 billion by Georgia-based investment company Invesco, from its earlier valuation of nearly $11 billion. Swiggy reached a $10.7 billion valuation in a round led by Invesco in January last year. Both BYJU's and Swiggy have slashed jobs in order to cut costs in the deepening funding winter.

The valuation cuts add a new dimension to the impact of the dwindling market conditions on the Indian startups. Funding activity in the Indian startup ecosystem slowed down last year, but because many of the larger startups raised capital on convertible notes (and hence pushed the price discovery to a later date) or did not raise capital at all, their last valuations have largely remained unchanged.

Masayoshi Son, founder and chief executive of SoftBank Group, indicated to the ongoing trend last year when he cautioned that the funding winter for startups may continue for longer because some unicorns were unwilling to accept lower valuations in fresh funding deliberations.