Macquarie maintained its value at $US22 billion. It continued to send bullish updates about Byju’s to investors in the Julius Baer co-investment vehicle, describing how it was “encouraged” by the company’s “focus on profitability” of its Indian business in May. In October, Macquarie told Julius Baer that Byju’s would generate “double-digit revenue growth” in the last financial year, documents showed.
Both of those updates came after Byju’s had sought more time from creditors to renegotiate a $US1.2 billion loan that was in breach of covenants. The company was also forced to replace its sales process after it was accused of mis-selling its products, including claims it was recruiting families who could not pay for the services.
Byju’s is also caught up in lengthy legal proceedings in the United States relating to $US533 million tied up in an offshore account, and allegedly hidden from investors.
Macquarie has previously dismissed reports about Byju’s’ financing, telling investors in May that they “contradict each other”. It told Julius Baer it was “extremely positive on the growth and profitability” of Byju’s’ Indian K12 business, and was “encouraged by the company’s focus on profitability and commitment to reduce cash burn in its international segments,” while it remained “watchful” of Byju’s’ 2022 audit.
Byju’s auditor, Deloitte, severed ties with the company in June last year due to “long-delayed” financial statements by the company. It was later replaced by BDO.
“Macquarie understands that there are progressed discussions regarding a potential fundraising and some preliminary discussions around listing. As a reminder, Macquarie will communicate to limited partners when there are confirmed updates only,” the investor update from May revealed.
Macquarie told investors in October that, based on Byju’s management reporting, the company had “delivered strong revenue growth”, and that it would break even – per earnings before interest, tax, depreciation and amortisation – in the last financial year.
Byju’s had cut jobs and slashed marketing expenses, Macquarie said in its October update, and the bank projected revenue to reach roughly $US1.24 billion last financial year. It was not until the October update when Macquarie said it expected to lower its value of Byju’s due to “current circumstances”.
A Macquarie spokeswoman declined to detail how much the company had raised for the MC Global Edtech Investments Holdings vehicle.
“For this investment, Macquarie’s valuations are independently audited once a year and fees are retrospectively charged (each April) for the previous year,” she said on Monday. “Therefore its valuations and fees covering the period during which Byju’s situation deteriorated will be charged next month. We are following an established process at the appropriate time and fees will only be charged based on that year-end valuation process.”
“In addition, Macquarie was explicitly clear in its presentation last October that it intended to lower its valuation on Byju’s for the year-end period in April.
“The commentary you quote on Byju’s from a Macquarie presentation in May 2023 states that the commentary is based on Byju’s management data from December 2022.”
Julius Baer intervenes
As reported by the Financial Review on Sunday, Julius Baer’s chief investment officer, Yves Bonzon, wrote to Macquarie in January seeking “an urgent review and discussion”.
Mr Bonzon said Macquarie was not incentivised to “devalue the position” in Byju’s even after other investors slashed their valuations of the company. Mr Bonzon also said Julius Baer’s requests were “often unanswered or sparing”, while information about Byju’s’ “audit timeline, financial practices and balance sheet restructuring” were “inadequately communicated and ordinarily at our request rather than proactive”.
Byju was founded by Byju Raveendran in 2011 and soared in popularity during the COVID-19 pandemic. Investment firms including General Atlantic and Silver Lake, among others, lined up for a stake in Byju’s, which harboured ambitions of an initial public offering.
Macquarie pitched investors on a Series F round, alongside BlackRock and T. Rowe Price, which valued Byju’s at $US12 billion, Macquarie said in a presentation at the time.
Julius Baer’s investors participated in the Macquarie vehicle through the Swiss bank’s co-investment feeder fund. There was a $US250,000 minimum commitment with a subscription fee of between 1 and 3 per cent. Macquarie charged a 1 per cent administrative fee per year tied to the value of Byju’s.
As part of its early investor communications, in December 2021, Macquarie said Byju’s “run-rate revenue” was approximately $US1.5 billion, and that the company had hit $US50 million in EBITDA for the first quarter of that financial year.
Julius Baer – which inked a partnership with Macquarie in 2011 that refers its clients to the Australian investment bank – devalued its own feeder fund by about 80 per cent last December. Byju’s also cut its valuation ask by 99 per cent during an attempt to raise $US200 million through a rights issue in January.
