Byju’s, India’s leading edtech start-up, which achieved a remarkable valuation of $22 billion in 2021, is currently facing a series of challenges.
The latest blow comes with the resignation of Deloitte India as Byju’s auditor on 22nd June.
Deloitte Haskins & Sells (Deloitte India) is a member firm of Deloitte Touche Tohmatsu Limited, one of the largest professional services networks in the world.
This development comes at a time when Byju’s is grappling with a debt crisis with a $1.2 billion loan payment issue.
Let’s look at the events that have unfolded over time, creating further turbulence for the edtech giant.
What led Deloitte India to resign as Byju’s auditor?
Deloitte India had been engaged with Byju’s since 2016.
Byju’s reappointed the firm as their statutory auditor for a five-year term commencing on 1st April 2020.
However, before the five-year term could conclude, Deloitte officially stepped down as the auditor for Think and Learn Pvt. Ltd., the parent company of Byju’s.
Byju’s, as reported in the media, faced a delay in releasing its financial statements for the period ending on March 31, 2022.
Deloitte mentioned that they did not receive any communication from Byju’s regarding the resolution of modifications to the audit report for FY 2021.
Following Deloitte’s resignation, Byju’s promptly appointed BDO (MSKA & Associates) as its new statutory auditor for the next five years.
Let’s look at the events that have unfolded over time, creating further turbulence for the edtech giant.
It’s important to note that Deloitte’s departure aligns with the resignations of three board members of Byju’s.
These board members represent well-known investors: Sequoia Capital India, the Chan-Zuckerberg Initiative, and Naspers Ventures.
As a result, the current composition of Byju’s board consists solely of the founder’s family, according to media reports.
Failure to pay off debt
Byju’s is currently facing several challenges.
Firstly, the company is dealing with a debt crisis and owes $1.2 billion in outstanding loan payments.
Byju’s defaulted on a $40 million repayment on June 5, which led to the company filing a lawsuit against its lenders, claiming harassment during the loan recovery process.
The delay in releasing financial statements could make the company’s debt situation worse.
Legal battles
In addition to financial struggles, Byju’s is involved in legal matters and is under scrutiny from regulatory authorities.
The Enforcement Directorate (ED) in India conducted searches and seizures at three of Byju’s Bengaluru premises, related to a case filed under the Foreign Exchange Management Act.
These investigations have revealed significant foreign direct investment and remittances to overseas jurisdictions.
Top investors have revised their valuations of Byju’s, causing concerns within the investment community.
Dutch-listed technology investor Prosus adjusted the valuation of Byju’s down to $5.1 billion in its annual report.
The US-based investment management firm BlackRock has also slashed the valuation multiple times, bringing it down to $8.3 billion.
Conclusion
Deloitte’s resignation and Byju’s declining valuation have raised concerns about the financial reporting and stability of the company.
Byju’s has been under controversy for some time now.
In 2022 Karti P Chidambaram, a Member of Parliament, requested the Institute of Chartered Accountants of India (ICAI) to scrutinize Byju’s financials for FY21. The startup released its FY21 financials in September, after a whopping 18 months delay.
India has one of the top ten startup ecosystems in the world. But it is facing significant challenges, posing a threat to the country’s growth potential.
These issues may raise concerns among global investors.
Now the question is, will Byju’s be able to weather the storm?
