BlackRock, Invesco devalue Byju’s, Swiggy stakes amid tech valuation adjustment

Recent US filings reveal that Byju's and Swiggy faced a decrease in their valuation from US investors last year. BlackRock reduced its investment value in Byju's by almost 50%, while Invesco marked down its investment in Swiggy by 23%, as reported by The Economic Times.

BlackRock's per-share value estimation for Byju's stood at $2,400 at the end of December 2022, down from $4,600 in April 2021. As a result, the company's valuation currently stands at just over $11 billion.

BlackRock, the largest asset manager in the world, has a stake of less than 1% in Byju's, which is India's most valuable privately held startup. Byju's was valued at $22 billion during its last funding round in October 2022.

However, recent US filings indicate the first markdown for the company, which has been criticized for reporting delays, mis-selling its courses, and its revenue recognition methods.

Invesco valued Swiggy's shares at $4,759 per share in October 2022, which is down from $6,212 in July of the same year. This has put Swiggy's valuation at $8.2 billion. This decline in valuation comes after the company had been valued at $10.7 billion following a $700 million funding round in January 2022.

Zomato, a competitor to Swiggy, went public in 2021 and was valued at approximately $5.5 billion as of Friday's close on the Bombay Stock Exchange (BSE). This is a significant decrease from its peak market cap of $17 billion in November 2021.

US institutional investors and their associated mutual funds frequently review the value of their holdings. In the past, mutual funds revised the valuations of companies such as Flipkart, Ola, and Paytm in 2016 during a relatively mild slowdown in funding.

According to BlackRock's recent filings, Byju's shares were valued at $2,855 per share in October of last year. The online publication The Arc was the first to report on the markdown for Byju's.

Byju and Swiggy did not respond to the queries.

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.

Byju's is reportedly planning to raise funds through a new fundraising round involving convertible notes. The company has reportedly held talks with both existing investors and sovereign and pension funds to secure financing.

Generally, no specific valuation is assigned to a company when funds are raised through convertible notes. Instead, participating investors receive a discount on the valuation when the company conducts its next equity funding round or experiences a liquidity event, such as an initial public offering.

To control losses, Byju's has been implementing cost-cutting measures, including two rounds of layoffs that have affected around 3,500 employees. The company reported significant losses of ₹4,588 crore in the fiscal year ending in March 2021, up from ₹262 crore in the previous year. 

Revenues from operations were also impacted, with readjusted revenue of ₹2,280 crore representing a 48% decline from the projected revenue of around ₹4,400 crore stated in unaudited results from the company's parent, Think & Learn Pvt Ltd.

Byju’s was in talks with creditors to increase interest rates on its term loan B (TLB) by at least 200-300 basis points, in addition to the current floating interest rate of 550 bps at Libor. 

Byju’s is renegotiating the largest loan arranged by an Indian startup, which it had taken to finance its North American market expansion and acquisitions. The loan was not rated, and the company had sought to refinance it due to delays in publishing FY21 and FY22 results, which led lenders to recall the loans.

Byju’s had taken the $1.2 billion term loan B (TLB) to finance its acquisitions and expansion in the North American market. The loan was the largest arranged by an Indian startup at the time of its raise, but it was unrated. 

Byju sought to refinance the loan at a higher interest rate after the lenders recalled the loan due to the delays in publishing FY21 and FY22 results. Byju’s was in discussions with creditors on raising interest rates on the TLB by at least 200-300 basis points at Libor plus a floating interest rate of 550 bps. 

The company had also planned to raise funds through convertible notes and had held discussions with existing investors as well as sovereign funds and pension funds to arrange the financing.

Byju’s had been cutting costs to contain losses and had fired about 3,500 people in at least two rounds of layoffs. The company reported losses of ₹4,588 crore for the year ended March 2021, up from just ₹262 crore in the previous fiscal year.

The pandemic-led boom for edtech companies like Byju's, Unacademy, and Vedantu came to an end as schools and offline education centers reopened. As a result, edtech firms experienced a sharp decline in funding compared to the previous year.

According to data from Tracxn, edtech startups received $3.1 billion in venture funding in 2022, which was a 42% drop from the $5.4 billion they received in 2021.

Swiggy's valuation has dropped amid challenges faced by the company, including firing 380 employees due to a slowdown in its core food delivery business. Its quick commerce unit, Instamart, has also been lagging behind rival Zomato's grocery delivery business Blinkit, according to a report by Jefferies.

Meanwhile, HSBC Global Research has noted that Zomato has started reclaiming market share lost to Swiggy in the second half of 2022, after relaunching its loyalty programme Zomato Gold. The slowdown in Swiggy's business has led to a drop in its valuation, with the SoftBank-backed company now valued at $4.5 billion, down from $5 billion in November 2021.