Prosus' dilemma: Is $500 mn an acceptable price to end its Byju’s headache?

Nikhil Patwardhan

29 reads

Nikhil Patwardhan

29 reads

Just 16 months ago, it appeared that Byju’s would go down as Prosus’s most successful Indian bet. Today, however, the investor is contemplating losing its entire $536 million investment in Byju’s as it sees little scope of turnaround under the current management

February 05, 2024

11 MINS READ

Key Takeaways

Prosus, Byju’s biggest institutional shareholder, has invested about $536 million in the company so far and holds a ~9% stake in the edtech
It now needs to pour another $18 million into Byju’s in the company’s upcoming rights issue to continue holding its stake
Given how much Prosus has already sunk into the company, investing this relatively small amount should not be a very difficult decision for Prosus.
Prosus, however, has little faith in Byju's managing a turnaround under the current management and, along with a clutch of other investors, has demanded the ouster of the Raveendran family from the company board

In a surprising turn of events last week, edtech major Byju’s initiated a rights issue at an astounding 99% discount compared to its last post-money valuation of $22 billion. Byju’s aims to raise about $200 million through this issue—a crucial financial boost to address the liquidity challenge the company is currently facing.

A rights issue is typically employed by financially strained companies, allowing them to issue new shares at a discounted rate for a specified period. This provides existing shareholders with the opportunity to invest further. Often, companies resort to rights issues as a means to repay debts.