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Akshat Shrivastava

Akshat Shrivastava

Nov 25
8 tweets

Here is how BYJU's lost almost 75% of its valuation. 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$.
[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%).
[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.
[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.
[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.
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