Introduction Of Byju’s
In a significant development that further raises questions about the financial health and governance of Indian edtech giant Byju’s, BDO, the startup’s auditor, has resigned with immediate effect. This marks the second auditor departure within a year for the embattled company, which is already entangled in multiple crises, including bankruptcy proceedings.
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Scathing Resignation Letter Highlights Issues
BDO subsidiary MSKA, which had been appointed as Byju’s auditor in August 2023 for a five-year term, cited several concerning issues in its resignation letter. These include significant delays in financial reporting, inadequate management support, and doubts about the company’s ability to recover substantial dues from a Dubai-based entity. The auditor’s exit adds another layer of complexity to Byju’s already tumultuous situation.
MSKA’s resignation comes after Deloitte, It previous auditor, and key board members left the company last year, also citing governance issues. The pattern of high-profile departures has intensified scrutiny on Byju’s internal operations and financial transparency.
Byju’s Response: Ethical and Legal Concerns
In response to the resignation, It issued a statement claiming that BDO’s requests would have required the firm to cross ethical and legal boundaries. The company accused BDO of recommending practices such as backdating reports, which It refused to do.
A Byju’s spokesperson stated, “The real reason for BDO’s resignation is It firm refusal to backdate its reports. BDO went to the extent of recommending a firm that could facilitate such illegal activity. Multiple call recordings exist where BDO representatives explicitly suggest backdating these documents, which BYJU’S refused to do. BYJU’S strongly believes this is the main reason for their resignation.”
Legal and Financial Troubles Intensify
The departure of MSKA adds to It mounting challenges. The edtech company, once valued at $22 billion and hailed as India’s most valuable startup, is now grappling with insolvency proceedings. Recently, the Indian Supreme Court decided to resume insolvency proceedings against the company, further escalating its legal woes.
MSKA’s resignation letter also highlighted concerns over ongoing litigation against It and its board, including the initiation of liquidation proceedings by lenders and allegations of oppression and mismanagement by minority shareholders. Moreover, MSKA disclosed that it has filed Form ADT 4, suggesting potential fraud or illegal activities within the company.
The situation has been further complicated by It failure to share critical information, such as notices for Extraordinary General Meetings (EGMs) and insolvency proceedings, with the auditing team. These lapses have raised concerns among stakeholders about the company’s governance and transparency.
Investor Confidence Wanes
It has seen its valuation plummet amid missed financial deadlines, revenue shortfalls, and conflicts with investors. Top backers, including Prosus and Peak XV, have previously expressed concerns over governance issues and have sought legal action to remove founder Byju Raveendran from the company.
The firm’s financial troubles have attracted attention not just in India but internationally. U.S. creditors are seeking to recover $1 billion from Byju’s, adding further pressure on the startup. The recent Supreme Court ruling to resume insolvency proceedings against the company is another blow to its already fragile financial standing.
Conclusion
The resignation of BDO, the second auditor to exit It within a year, raises serious concerns about the company’s financial stability and governance. As It faces increasing legal, financial, and operational challenges, the future of India’s once-promising edtech unicorn remains uncertain. With ongoing bankruptcy proceedings and mounting pressure from creditors and investors, the road ahead for Byju’s looks increasingly precarious.
