Just when you thought things couldn't get any worse, another bombshell drops. The perfect explainer of Byju’s story. Byju's has been through the wringer lately, facing scaling losses, delayed financials, layoffs aplenty, reports of a toxic work culture, unexpected raids by authorities, and even lawsuits from lenders over a hefty $1.2-billion term loan. They've countered those lawsuits, witnessed their lending partners cutting ties and bid farewell to resigning board members.
And now, adding fuel to the fire, comes the latest blow: Deloitte, the edtech’s statutory auditor, has bid adieu to Byju's and its subsidiary, Aakash Educational Services.
This resignation is not just a minor blip on the radar. It serves as a stark reminder that Byju's problems have been worsening for quite some time. On June 22, 2023, Deloitte made the bold move to sever ties with Byju's and its subsidiary. But let's backtrack a bit.
Deloitte was appointed as the statutory auditor of Think & Learn Private Limited (the parent entity housing Byju's and its subsidiaries) back in April 2020, with a five-year tenure set to end in March 2025. However, things took a turn for the worse.
Deloitte, in a stern letter to the Board of Directors, expressed its frustration over the long-delayed annual financial statements for the year ended March 2022. These statements were supposed to be presented at the shareholders' AGM by September 30, 2022, but they never saw the light of day. Deloitte reached out multiple times to Byju Raveendran, the Managing Director, and the company's board, but their pleas fell on deaf ears. What's more, Deloitte never heard on resolution of the modifications mentioned in the company's audit report for FY 2020-21 and the status of audit readiness of the books for FY 2021-22, and accordingly, they were never able to commence the audit!
Deloitte expressed an adverse opinion on the company’s financials and its internal financial controls due to material weakness in its financial reporting for FY2020-21. Few eyebrow-raising highlights are mentioned below:
The audit fees paid to Deloitte included an additional INR 3.5 crores on account of ‘additional effort incurred in the audit consequent to material weaknesses observed in internal controls.’ Ouch!
Amidst all this, Byju's has already scrambled to find a replacement. They have announced the appointment of MSKA & Associates, the audit arm of accounting firm BDO, as their new statutory auditors for both Byju's and Aakash, starting from the year ended March 2022. Byju's claims that the recently appointed CFO Ajay Goel has quickly familiarized himself with the company's financial landscape and that BDO was chosen after a rigorous selection process. They are determined to ‘strengthen financial governance.’
Auditor resignations are not an uncommon occurrence. In the past, we've seen similar situations unfold with renowned companies like the Adani Total Gas, Atlas Jewellery, Zomato's subsidiary Hyperpure, and more. It's a telltale sign of underlying issues.
So, now we wait with bated breath to see how the new auditor evaluates the situation and how swiftly we can get our hands on Byju's financial statements for FY 2021-22.