Byju’s Faces Obstacles As Auditor Deloitte Says Goodbye.
Following Deloitte's departure, Byju's announced that company has hired BDO (MSKA & Associates) as its statutory auditor for a five-year term beginning in fiscal year 2022.
According to reports, three members of Byju’s board of directors, as well as its official auditor Deloitte, have resigned, adding to the edtech company’s escalating problems. However, in a statement, Byju’s denied that the board members had resigned.
GV Ravishankar, managing director at Peak XV Partners (formerly Sequoia Capital India), Russell Dreisenstock of Prosus (formerly Naspers), and Vivian Wu of the Chan Zuckerberg Initiative have all resigned away from the board, according to reports.
The presently reported revelation has exacerbated the downward spiral of India’s once most valuable privately held start-up, estimated at $22 billion. The corporation has yet to accept the resignations.
Following Deloitte’s departure, Byju’s announced that company has hired BDO (MSKA & Associates) as its statutory auditor for a five-year term beginning in fiscal year 2022.
BDO will cover Think and Learn Holdings, its subsidiaries such as Aakash Education Services, and the entire group’s consolidated results.
A spokeswoman for Byju recently stated that a media report implying resignations of firm board members is purely hypothetical. Byju’s categorically disputes these allegations. Any important developments or changes within our company are communicated via formal channels and notifications, according to the statement.
Peak XV Partners, Prosus, and the Chan Zuckerberg Initiative did not immediately comment.
Deloitte warned in a June letter that Byju’s financial accounts for fiscal year 2022 are overdue.
The inspected financial accounts for the financial year ending March 31, 2022 were due to be brought before shareholders at the annual general meeting by September 30, 2022, according to the memo. They have also not received any communication regarding the resolution of audit report modifications for the fiscal year ended March 31, 2021, the status of audit readiness of the financial statements and the underlying books and records for the fiscal year ended March 31, 2022, and have been unable to begin the audit as of date. As a result, the ability to plan, create, implement, and conclude the audit in compliance with the applicable auditing standard may suffer significantly.
Deloitte informed Byju’s board of directors that they are resigning as the company’s statutory auditors with immediate effect.
The news comes at a time when the Bengaluru-based edtech is mired in legal battles with lenders, debt defaults, value markdowns by current investors, and a much-delayed presentation of its financial statements for the accounting year ending 31st of March, 2022.
All three investors have agreed to quit as a group. There are ongoing conversations between the corporation and shareholders, but the action, according to the sources, suggests a deepening schism between shareholders and the company.
The investment group made the decision because the company’s handling of the lender disagreement was deemed inappropriate.
Prosus stated last year that it had lost “significant influence” over Byju’s after its ownership in the company was reduced to just under 10%. As of November 2022, it had around 9.67% of the edtech business, with Byju Raveendran and his family holding 26-27% and Peak XV Partners holding approximately 6%.
Byju, an online education platform, is experiencing a number of hurdles, including negotiating new conditions for its $1.2-billion term loan B, despite the fact that both parties have sued each other. The corporation is still meeting with creditors one-on-one to arrange new conditions.
While lenders such as Glas Trust Company are taking legal action against the edtech business in Delaware, US, Byju’s has launched a suit in New York against hedge fund Redwood and its subsidiaries in response to their demand for “accelerated repayment.”
The business, led by founder and CEO Byju Raveendran, has been cutting thousands of staff in the last year to slash expenses amid a slowdown in funding and a lack of development in the online education market as Covid-19 has ebbed.
According to insiders, the General Atlantic-backed corporation began a new wave of layoffs earlier this week, which might affect up to 1,000 positions. These layoffs are likely to affect departments across Byju’s and its coding subsidiary, Whitehat Jr.
After nearly 18 months, Byju’s finally revealed its fiscal statistics for FY21 in September. Its operational income had been readjusted to Rs 2,280 crore at the time, despite massive losses of Rs 4,588 crore, up from Rs 262 crore the previous fiscal year. The revised sales represented a 48% decrease from the estimated revenue of almost Rs 4,400 crore reported in parent Think & Learn’s unaudited earnings.
Byju’s declared approximately Rs 10,000 crore in gross sales in FY22 in a press release last year. This is an unaudited figure.
BlackRock, a minority shareholder with less than 1%, reduced the edtech’s valuation to $8.29 billion in May, according to a document dated March 31, 2023. This was the second recent occasion, with BlackRock lowering the startup’s valuation to little more than $11 billion in December 2022.
It has been attempting to raise additional funds through a combination of equities and convertible notes, but nothing has been finalised or published. Byju’s has agreed to a Rs 2,000 crore investment round from Davidson Kempner Capital in the form of a structured credit deal against the cash flows of its test prep business Aakash Educational Services.
On the 29th of April, the Directorate of Enforcement searched numerous Byju’s locations as part of an investigation into alleged violations of foreign currency laws regarding the edtech company’s investments and transfers of monies overseas.
