“The Macquarie… team has not only clung to a grossly inflated valuation of Byju’s at $US22 billion, defying all market signals and financial indicators that screamed for a significant markdown, but has also consistently fed us and other investors distorted metrics,” the letter to the UK FCA said.
“Macquarie’s fee structure, which calculates annual management fees based on the latest mark-to-market value, creates an incentive to maintain or inflate valuations, directly benefiting Macquarie through increased fees at the expense of investor interests.”
The FCA did not reply to a request for comment.
Row over valuations
As previously reported by this masthead, Macquarie held its value of Byju’s at $US22 billion last year, and sent bullish updates about the company to investors in the Julius Baer co-investment vehicle.
Macquarie said in an investor update last October that it projected revenue at Byju’s to reach roughly $US1.24 billion last financial year. It was not until the October update that Macquarie conceded it expected to reduce its valuation due to “current circumstances”.
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 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.
‘Established process’
A spokeswoman for Macquarie said last week that its valuations were audited annually and that fees were “retrospectively charged” for the previous year’s performance in April.
“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.”
Julius Baer’s chief investment officer, Yves Bonzon, wrote to Macquarie in January seeking “an urgent review and discussion” about the Byju’s vehicle.
