Byju Raveendran, founder and chief executive officer of Think & Learn, speaks during the Credit … [+]
Beleaguered edtech company Byju’s parent Think & Learn, which not long ago was the world most valuable edtech company valued at $22 billion, has plunged into yet another crisis. The company’s auditor Deloitte Haskins & Sells resigned this week, citing inordinate delays in filing its financial results for the fiscal year ended March 31, 2022.
On the heels of that resignation, Byju’s announced that it has appointed BDO (MSKA & Associates) as its auditor for five years starting retrospectively from the fiscal year 2022. There were also reports that three board members had resigned following the auditor’s announcement but Byju’s denied that calling it “entirely speculative.”
As for the new auditor, Byju’s noted in a release that “BDO will cover the holding company—Think and Learn, its material subsidiaries such as Aakash Education Services Limited as well as the overall group consolidated results. This comprehensive audit coverage will provide a holistic view of Byju’s financial performance and ensure transparency across the organization.”
Meanwhile, in a letter filed to India’s Ministry of Corporate Affairs, Deloitte said that the results had been “long delayed.” As per law, results have to be presented to shareholders before September 30, 2022. Deloitte said in the letter that it had sent emails regarding the audit for fiscal 2022 to the company’s billionaire founder Byju Raveendran in September, November and December 2022.
“We have also not received any communication on the resolution of the audit report modifications in respect of the year ended March 31, 2021, status of audit readiness of the financial statements and the underlying books and records for the year ended March 31, 2022, and we have not been able to commence the audit as on date,” Deloitte said. “As a result, there will be a significant impact on our ability to plan, design, perform and complete the audit in accordance with the applicable auditing standards.”
This is the latest blow in a series of trials at the Bangalore company. It’s already embroiled in a legal battle with a group of lenders in a U.S. court over a $1.2 billion loan. In June, Byju’s refused to make a $40 million interest payment and filed a lawsuit alleging that a group of investors was trying to extort money from the company.
Earlier in May, an agent for the lenders of the $1.2 billion loan—made in 2021 for a five-year period—filed a lawsuit in Delaware in the U.S. alleging that the company was “hiding” $500 million. Also in April, the Enforcement Directorate, an Indian government agency that investigates money laundering cases, conducted raids on three premises linked to him as part of an investigation into alleged foreign exchange violations. Byju’s said the searches were part of a “routine inquiry” and that it would “work closely” with the authorities.
Calls to founder Byju Raveendran and his wife and cofounder Divya Gokulnath were not returned.
Analysts say that at least some of Byju’s problems stem from the fact that it didn’t pivot fast enough from an online platform to hybrid and offline offerings. During the Covid-19 pandemic, nearly 100 million students had enrolled on its eponymous app. But with schools re-opening the online model lost its sheen.
“Their model ceased to have relevance post-Covid,” says Ganesh Natarajan, chairman of digital consulting and investment company 5F World. “And too little was done—and too late—to change that. All investors will have to take a huge haircut”
The company’s valuation was already marked down twice by minority investor BlackRock, which slashed the valuation to $11.5 billion in October and further to $8.4 billion in May.
Byju Raveendran’s personal fortune is down to $1.3 billion from its peak of $2.9 billion in March 2022.
The Bangalore company had reported a 3% drop in revenue and a net loss of 45.6 billion rupees ($573 million) for the financial year ended March 31, 2021- even as its operating expenses more than doubled.
Byju’s—founded by former teacher Byju Raveendran in 2011—has a list of marquee investors including private equity giants like Tiger Global and Sequoia as well as Facebook’s Mark Zuckerberg.