The COVID-19 pandemic has had an unprecedented impact on the global financial markets and a number of Indian startups have been impacted as well. Two major Indian startups, Byju’s and Swiggy, which had been growing aggressively prior to the pandemic, have taken a major hit to their valuations as US investors have recently slashed their valuations.
Byju’s, India’s leading edtech startup, and Swiggy, a popular food delivery app, have seen their valuations drop by 20-30% due to the effects of the pandemic and the continued uncertain economic situation. This is a huge concern for the startups, as investors are shying away from investing in them due to the impact of COVID-19 on the market.
The board of Byju’s reportedly conducted a markdown exercise and reduced the company’s valuation to $5.5 billion, around 26-28% lower than its previous valuation of $7.5 billion. Similarly, Swiggy’s valuation decreased by around 22 percent, dropping to $3.6 billion from $4.61 billion in December 2019.
The sudden and drastic reduction in valuation of both the companies has surprised many, who believed that their future was secure and that they would be able to weather the storm of the economic downturn caused by COVID-19. Byju’s was considered to be a star performer in the Indian startup scene and had recently raised $500 million in a funding round from investors such as General Atlantic, Tiger Global and Naspers. Similarly, Swiggy had raised over $1.5 billion from various investors including Tencent, Naspers and Softbank.
This sudden drop in valuation of both the companies casts doubts on their long-term viability and future prospects. Although the impact of the COVID-19 pandemic on the startup ecosystem has been widely reported, this valuation slash could be a major blow for the companies. While Byju’s and Swiggy have been able to sustain themselves thus far, they could be hit hard by the current market climate. This has put additional pressure on the startups to prove their growth potential in order to attract more investors and boost their valuation.
While the pandemic continues to cast a long shadow over the global economy, Byju’s and Swiggy have a long way to go before their valuations can be restored to their pre-COVID highs. Nevertheless, both the companies have a bright future ahead of them and they should use this opportunity to innovate and find new opportunities to grow in the coming months.
