Prosus has called edtech firm Byju’s and healthtech startup PharmEasy as the biggest “underperformers” in its India portfolio. According to the Netherlands-based company’s financial report for the first half of the 2023-2024 fiscal, these underperformers have dented its internal rate of return (IRR)—it dropped from 18% in H1FY22 to 5% in the six months ended 30 September.

According to the company’s report, Byju’s registered a negative IRR of 24%, while Pharmaeasy recorded a 41% negative return in the first half of FY24.

First, let’s take a look at the mess at Byju’s.

Byju’s woes: The investment giant has cut the edtech firm’s valuation to less than $3 billion. “We have reported a mark down in Byju's current value. We have written it by a further $315 million. We do that from time to time. It does not reflect our long term view of the business. It reflects current trading circumstances,” a senior Prosus executive said.

This is the third time Prosus has marked down its valuation of the beleaguered edtech firm within a year. In November last year, Prosus had cut Byju’s valuation to $5.97 billion. This is a sharp decline from Byju’s $22 billion valuation in October 2022, when it raised a $250 million funding round. In June, the investment company slashed its valuation to $5.1 billion, marking down the fair value of its 9.6% stake in the firm to $493 million.

While valuation markdowns are not unusual, the fundamental issue here is that no one knows the real numbers at Byju’s. The company has not released audited financials for any fiscal year since 2020-21. The last audited data we have for India’s largest edtech company is 32 months old. So, in the absence of any clear picture of the company’s business at present, Prosus’s numbers could just be, well, generous, to put it politely.

It is completely possible that Byju’s valuation is far lower than the marked-down value in real terms. But we can’t know as there are no numbers to go by. What we do know is that the company is facing a chronic cash crunch that is deepening.

On Wednesday, The Economic Times reported, citing sources, that Byju’s top shareholders are insisting on executing specific conditions before considering any future fundraise. These shareholders are urging the firm to promptly submit audited financials for FY23 and calling for founder Byju Raveendran to relinquish some of his day-to-day control over the firm, according to ET. Byju’s had said it would file the delayed FY23 results by December, but meeting this deadline seems unlikely.

Earlier this month, the company finally released its results for FY22, after a delay of over a year. However, these were only standalone numbers, not even the complete results for its core business, which make little sense now as much of the scenario seems to have changed for the firm. (For more context read: The inanity of Byju’s partial earnings release) The company had also filed its FY21 results in September last year after delaying it for over a year. (Read: Byju’s 2020-21 financials show it’s a house of cards)

Additionally, in July, Prosus’s representative on Byju’s board, along with those from Peak XV and the Chan-Zuckerberg Initiative, resigned—citing differences between the company’s leadership and its board.

Byju’s pile of problems seems to be growing by the day. Amid its biggest headache—a $1.2 billion term loan raised in the US—the embattled edtech giant faces issues of corporate governance and cash crunch and has had to resort to massive layoffs. It also saw several high-level exits, an auditor calling it quits and a show-cause notice for Foreign Exchange Management Act violations of over Rs 9,000 crore.

While efforts are on to resolve the loan problem (also read: Selling Epic and Great Learning won’t solve Byju’s cash flow problem), a fresh lawsuit in another American court has complicated matters for the company. The company is reportedly in “advanced talks” for Epic’s sale for about $400 million—a seeming fire sale considering it paid $500 million to bag the business in 2021.

Additionally, back home, while Davidson Kempner was gearing up to take control of Aakash, Manipal Group chairman Ranjan Pai reportedly injected Rs 1,400 crore to clear Byju’s debt to the US-based investment firm. Pai has reportedly extended an additional Rs 250-270 crore in fresh funding to Byju’s in recent weeks, per the ET report. In exchange, Raveendran has committed to giving a portion of his personal stake (about 27%) in Aakash.

Read our coverage of Byju’s here.

Now, coming to Prosus’s other problem child—PharmEasy

The healthtech startup: At a time PharmEasy is struggling to raise funds, repay the debt it took to buy diagnostics firm Thyrocare and has put its initial public offering on hold, Prosus has marked down the valuation of the startup.

“Another is a write down in PharmEasy of about $118 million and that's really driven by the need for PharmEasy to raise money to settle debt. We actually participated in that round which expresses our confidence in the business going forward,” a Prosus representative told Moneycontrol.

However, while the representative said that Prosus currently holds a 13% stake in PharmEasy, the Mumbai-headquartered company’s valuation was not disclosed.

The markdown comes after PharmEasy’s July announcement that it would raise around Rs 2,400 crore via a rights issue to pay off a loan from Goldman Sachs at a 90% valuation markdown from its last. (Also read: Decoding PharmEasy’s latest down round logic.)

Additionally, the company’s investors have also slashed its valuation this year—global asset management company Janus Henderson cut PharmEasy’s valuation by half to $2.8 billion and American investment management firm Neuberger Berman by 21% to $4.4 billion.

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However, it’s not just bad news for Prosus’s other India investments.

For the six months ended September, Prosus recorded profitable returns from other Indian startups in its portfolio—IRR of 7% from food delivery major Swiggy, 22% from executive education company Eruditus, 30% from fintech firm PayU India, 32% from e-commerce firm Meesho and 31% from B2B e-commerce platform Elastic Run.