May 31, 2023

Meesho co-founders Sanjeev Barnwal (left) and Vidit Aatrey. Photo: Mint 30 May, 2023 Private equity firm BlackRock, which holds a minority stake in BYJU’S, has marked down its valuation to $8.4 billion, in yet another valuation downgrade for the edtech giant. In April too, BlackRock marked down its valuation to $11.15 billion, a huge drop from the $22 billion valuation the Indian edtech giant had secured during its last fundraising earlier this month. A source familiar with the matter said the company had closed $250 million in a fresh funding round from US-based fund manager Davidson Kempner Capital Management and is in talks to close another $750 million by the end of the month. Earlier, Netherlands-based technology investor Prosus had written down the value of its existing 9.67% stake in the decacorn to a mere $578 million at the end of the September quarter, thereby pegging its valuation at about $5.9 billion. However, it did not exit the company. Separately, Fidelity Investments also slashed the fair value of SoftBank-backed social e-commerce startup Meesho by 10%. Through multiple funds such as Variable Insurance Products Fund III and IV, and Fidelity Central Investments Portfolio LLC, Fidelity Investments has slashed the fair value of Meesho by 9.7%. This effectively pegs the valuation of the company at $4.4 billion, moneycontrol.com reported on Tuesday. Many investors are carefully reassessing the value of their investments amid looming recession fears and a challenging fundraising environment. In an exclusive live webinar organised by DealStreetAsia last month, BYJU’s co-founder Byju Raveendran said that he was not worried about the drop in the company’s valuation, as “there is no science behind the valuation.” “The valuation change has nothing to do with the company’s growth. When the public market comparables change, investors take a conservative approach and mark down their valuations,” he had said. Some of the other Indian startups that have recently seen a valuation downgrade include health tech firm PharmEasy, ride-hailing startup Ola and fintech firm Pine Labs. These companies are backed by prominent investors such as Softbank, Tiger Global and Sequoia. While SoftBank has invested in Ola, Swiggy, and BYJU’s, Sequoia Capital is on the cap table of Ola, Swiggy, BYJU’s, and Pine Labs. Tiger Global Management has backed Ola, Swiggy, and BYJU’s. Factors such as financial performance, growth potential, market position, and profit generation capabilities impact a company’s valuation, said Gaurav Singhvi, co-founder of We Founder Circle. Failure to meet growth targets, operational challenges, or difficulties in adapting to market changes can lead to investors reassessing and lowering valuations, he added. Earlier this month, Meesho laid off 15% of its workforce, amid increasing pressure for the company to tighten costs and sharpen focus on profitability. Last year, Meesho said it was working on becoming EBITDA-positive by mid-2023 before going public. In FY 2022, its losses widened 7.5 fold to Rs 3,247 crore despite a 4.5 times surge in revenue to Rs 3,232 crore during the same period, according to Entrackr. The valuation downgrades come against the backdrop of the ongoing funding winter, driven by multiple factors such as the rate hikes in developed markets, the geopolitical situation in Eastern Europe, and COVID-related supply chain shocks. Indian startups raised $3.36-billion funding in the first quarter of 2023, down 72% from the last year, according to data from DealStreetAsia DATA VANTAGE’s latest report India Deal Review: Q1 2023 . At this run rate, Indian startups will raise just over $13 billion in 2023.