Byju’s, a leading player in the edtech sector, is grappling with escalating financial challenges as BDO (MSKA & Associates), its second auditor in as many years, resigns over financial and governance concerns. The resignation of BDO follows the departure of Deloitte, the previous auditor, who stepped down citing issues with financial reporting at Byju’s.
In its resignation letter, BDO underscored several critical issues including persistent delays in financial reporting, a lack of cooperation from management, and significant doubts regarding the recovery of substantial dues from a Dubai-based entity, More Ideas General Trading LLC. The amount in question, approximately Rs 1,400 crore, was reported to the Ministry of Corporate Affairs on September 2.
The resignation letter also detailed other significant challenges faced by Byju’s, such as ongoing litigation, creditors initiating liquidation proceedings, and claims of mismanagement from minority shareholders. Additionally, BDO noted Byju’s failure to provide essential information for audits, including notices of extraordinary general meetings (EGMs) and details of insolvency proceedings.
In response to BDO’s resignation, Byju’s issued a statement addressing the allegations, emphasizing its compliance with legal and ethical standards. The company accused BDO of making unethical requests, including suggestions to backdate reports—a claim BDO allegedly supported by recommending a firm that could engage in such activities. Byju’s refuted these requests, citing them as the primary reason for BDO’s resignation.
This development marks another setback for Byju’s, which had achieved a valuation of $22 billion, positioning it as India’s most valuable startup. The company’s troubles intensified following a Supreme Court decision to resume insolvency proceedings, adding to a series of legal and financial challenges.
BDO had stepped in as Byju’s auditor in August 2023 after Deloitte’s departure and was reaffirmed during the company’s annual general meeting in December of the same year, with a term from FY23 to FY27. Byju’s reported significant losses for FY22, totaling Rs 8,245 crore against an operating revenue of Rs 5,014 crore.
The ongoing legal disputes include a recent Supreme Court decision to expedite a hearing regarding an appeal by US-based creditor Glas Trust Company LLC against a previous NCLAT ruling. The NCLAT had previously stayed the insolvency proceedings following a settlement agreement with the Board of Control for Cricket in India (BCCI), a decision reversed by the Supreme Court on August 14, which now allows Byju’s to proceed with its settlement.
The resignation of BDO adds to the mounting pressures facing Byju’s as it strives to resolve its financial issues and regain stakeholder confidence amid significant scrutiny of its governance and financial management practices.
