US investors marked down the value of their holdings in Byju’s and Swiggy last year, according to recent US filings. BlackRock slashed the value of its investment in Byju’s by nearly 50%, while Invesco marked down its investment in food delivery firm Swiggy by 23%.

BlackRock pegged the per-share value of Byju’s at $2,400 at the end of December 2022, down from $4,600 in April last year, putting the company’s valuation at a little over $11 billion.

The world’s largest asset manager, BlackRock owns less than 1% in the firm. Byju’s, India’s most valuable privately held startup, was valued at $22 billion at the time of its last fundraise in October 2022. This is the first markdown for the company, which has been under the scanner for delays in reporting earnings, overall business practices such as mis-selling its courses and the way it recognised its revenues.

According to filings seen by ET, Invesco valued Swiggy’s shares at $4,759 apiece in October 2022, compared with $6,212 in July 2022, putting the company’s valuation at $8.2 billion. Swiggy was valued at $10.7 billion after it closed a $700-million round in January 2022.

Rival Zomato, which went public in 2021, was valued at around $5.5 billion at Friday close on the BSE, after having peaked at $17 billion in market cap in November 2021.

Periodic valuation reviews

US institutional investors and mutual funds managed by them review the value of their holdings at regular intervals. Flipkart, Ola, Paytm and others had their valuations revised by mutual funds in 2016 amid a relatively less harsher slowdown in funding at the time.

As per BlackRock’s filings, Byju’s shares were valued at $2,855 apiece in October last year. The Byju’s markdown was first reported by online publication The Arc.

Byju’s and Swiggy didn’t respond to queries.

ET reported earlier this month that Byju’s was seeking to refinance at a higher rate its $1.2-billion term loan B, a development linked to the delays in publishing FY21 and FY22 results, which led lenders to recall the loans.

The edtech company is planning another fundraising round through convertible notes and has held discussions with existing investors as well as sovereign funds and pension funds to arrange the financing. Typically, no valuation is ascribed to a company when funds are raised through convertible notes. Participating investors get a discount in valuation when the company raises its new equity funding round, or if there is a liquidity event such as an initial public offering (IPO).

Edtech funding loss
Byju’s has been cutting costs to contain losses. About 3,500 people have been fired in at least two rounds of layoffs.

The edtech platform reported losses of Rs 4,588 crore for the year ended March 2021, up from just Rs 262 crore in the previous fiscal year. Readjusted revenue from operations stood at Rs 2,280 crore, down 48% from projected revenue of about Rs 4,400 crore cited in the unaudited results of Think & Learn Pvt Ltd, the parent company that operates Byju’s.

ET reported on March 20 that Byju’s was in discussions with creditors on raising interest rates on the term loan B (TLB) by at least 200-300 basis points (bps) at Libor plus floating interest rate of 550 bps. The additional interest rate being discussed by Byju’s is on top of the 550 bps, the report said. A basis point is 0.01 percentage point.

The TLB that Byju’s is renegotiating was the largest arranged by an Indian startup at the time of its raise, but the loan was unrated. The company, which is backed by marquee investors including General Atlantic and Prosus, had taken the loan to finance its acquisitions and expansion in the North American market.

Soon after that, Byju’s came under pressure to improve its financials. It then pulled back on some of its new investments, given the weaker macroeconomic conditions, with some of its potential acquisitions in the US also being put on the back burner.

Edtech companies such as Byju’s, Unacademy and Vedantu, which saw a boom during Covid-19, suffered heavily once the pandemic receded and schools and other offline education centres reopened. While the overall funding slowed down for startups, edtech firms bore the brunt. Edtech startups received $3.1 billion in venture funding in 2022, compared with $5.4 billion in 2021, a drop of over 42%, according to data sourced from Tracxn.

On Thursday, ET reported that SoftBank-backed Unacademy undertook yet another round of layoffs, firing 12% of its workforce as it faces pressure to cut down on its cash burn rate. Unacademy founder and chief executive Gaurav Munjal on Friday announced that the company’s leadership, including the founders, will take a permanent salary cut of up to 25%.

Changes & challenges
The drop in Swiggy’s valuation comes amid challenges for the SoftBank-backed company. It had fired 380 employees this year as its core food delivery business slowed. Meanwhile, rival Zomato, since the relaunch of its loyalty programme Zomato Gold, has started reclaiming the market share it had lost in the second half of 2022 to Swiggy, HSBC Global Research said in a note.

Swiggy’s quick commerce unit Instamart is lagging rival Zomato’s grocery delivery business Blinkit, according to a report by brokerage firm Jefferies. In the first six months of 2022, Instamart recorded a gross merchandise value (GMV) of $257 million, compared with the $270 million GMV recorded by Zomato-owned Blinkit, the report added.

ET reported on Friday that Instamart head Karthik Gurumurthy will step aside by the end of April. Swiggy cofounder Phani Kishan Addepalli is slated to take over. Swiggy confirmed the development to ET.