Here is how BYJU's lost almost 75% of its valuation.
A thread...
A thread...
[1] At one point in time BYJUs was valued at 22Bn.
Now, Prosus- one of BYJU's investors- has stated that the fair value of the firm is 5.7Bn$.
Now, Prosus- one of BYJU's investors- has stated that the fair value of the firm is 5.7Bn$.
![[1] At one point in time BYJUs was valued at 22Bn.
Now, Prosus- one of BYJU's investors- has stated...](https://pbs.twimg.com/media/FiY02rAVEAAxe3T.png)
[2] Why did the valuations got crushed? For this you need to understand the power of debt!
[3] In 2020, due to COVID crash: debt was cheap.
- Taking a loan was extremely cheap (no one wanted to hold money)
- Why? Interest rates were extremely low. Why would you want to do a fixed deposit at 4-4.5% rates? (when inflation is 7-8%).
- Taking a loan was extremely cheap (no one wanted to hold money)
- Why? Interest rates were extremely low. Why would you want to do a fixed deposit at 4-4.5% rates? (when inflation is 7-8%).
[4] You would simply go and risk that money in stocks/startups/other places.
On top of this: due to COVID, many businesses shut shop and many were available at discounts to buy.
Almost every big firm, big investor understood this.
On top of this: due to COVID, many businesses shut shop and many were available at discounts to buy.
Almost every big firm, big investor understood this.
[5] Therefore, we saw Reliance raising massive capital (why? cheap debt).
Startups like BYJU's did the same.
More acquisitions meant more revenues.
And, a sense of growth.
Startups like BYJU's did the same.
More acquisitions meant more revenues.
And, a sense of growth.
[6] Unfortunately, there is a temporarily halt in cheap credit, in 2022.
And, it might take at a year or two for the cheap credit story to revive.
People are impatient about growth.
More interestingly, they become even more impatient, if there is de-growth.
And, it might take at a year or two for the cheap credit story to revive.
People are impatient about growth.
More interestingly, they become even more impatient, if there is de-growth.
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