Byju’s crisis worsens as second auditor BDO resigns over financial concerns
Byju’s, the once high-flying edtech startup, is facing yet another setback as BDO (MSKA & Associates), its auditor, has resigned amid concerns over financial and governance issues.
BDO’s exit comes just more than a year after Deloitte, the company’s previous auditor, stepped down citing problems with Byju’s financial reporting. In its resignation letter, BDO highlighted several troubling issues, including delays in financial reporting, lack of support from the management, and concerns over recovering outstanding dues from a Dubai-based entity.
Specifically, BDO raised doubts about the recovery of approximately Rs 1,400 crore from More Ideas General Trading LLC, a reseller based in Dubai. The transaction was reported to the Ministry of Corporate Affairs on September 2. BDO also pointed to other challenges facing Byju’s, such as ongoing litigation, liquidation proceedings initiated by creditors, and allegations of mismanagement by minority shareholders.
Furthermore, BDO stated that Byju’s failed to provide crucial information, including notices for extraordinary general meetings (EGMs) and insolvency proceedings, to its audit team.
What did Byju’s say?
Following the resignation, Byju’s released an official statement, highlighting serious concerns about unethical requests made by BDO.
“Byju’s has complied with every request made by BDO, except those that would require crossing ethical and legal boundaries. The real reason for BDO’s resignation is Byju’s firm refusal to backdate its reports, while BDO went to the extent of recommending a firm that could facilitate such an illegal activity,” the edtech firm said in an official statement.
“Multiple call recordings exist, where BDO representatives explicitly suggest backdating these documents, which Byju’s refused to do. Byju’s strongly believes that this is the main reason for their resignation,” it added.
Blow to Byju’s
The development is a significant blow to Byju’s, which was once valued at $22 billion and hailed as India’s most valuable startup. The company has faced mounting challenges in recent months, including a Supreme Court ruling to resume insolvency proceedings against it.
BDO was initially appointed as Byju’s auditor in August 2023 after Deloitte’s resignation, filling a vacancy left by the firm. In December of the same year, BDO was re-appointed as the statutory auditor during the company’s Annual General Meeting, with its term set to run from FY23 to FY27.
Byju’s financial woes began when it delayed the submission of its FY22 financial results to regulators, leading Deloitte to flag discrepancies and eventually resign. Following BDO’s appointment, Byju’s reported a consolidated loss of Rs 8,245 crore for the fiscal year ending March 31, 2022, against an operating revenue of Rs 5,014 crore.
Meanwhile, the company remains embroiled in multiple legal battles. The Supreme Court recently agreed to expedite a hearing on the appeal of US-based creditor Glas Trust Company LLC, which had contested a previous ruling by the National Company Law Appellate Tribunal (NCLAT).
The NCLAT had stayed insolvency proceedings against Byju’s after approving a settlement of Rs 158.9 crore with the Board of Control for Cricket in India (BCCI).
The Supreme Court had earlier rejected a plea to prevent Byju’s creditors from holding meetings related to the company’s insolvency proceedings. However, a ruling on August 14 reversed the NCLAT’s earlier decision, halting the insolvency process and allowing Byju’s to proceed with its settlement with the BCCI.
The ongoing legal challenges and financial difficulties have raised questions about Byju’s future, once a symbol of India’s booming edtech sector. With the resignation of BDO, the company now faces mounting pressure to resolve its financial and governance issues to restore confidence among stakeholders.