Excerpt from inc42r Article, Published on Jan 24, 2024
In a financial disclosure that sent shockwaves through the edtech industry, BYJU’s, the embattled education technology giant, unveiled its FY22 results on Tuesday, revealing substantial losses and auditor-identified compliance issues. Notably, the company has allocated a significant sum of INR 18.87 crore in anticipation of potential penalties for non-compliance with the Companies Act.
BYJU’S, under the scrutiny of auditor MSKA & Associates, has been found to be in violation of various provisions of the Companies Act related to compliance timelines. The auditor highlighted that BYJU’s and its three subsidiaries—Aakash Edutech, Aakash Educational Services, and Whitehat Education Technology—were not in compliance with key sections of the Act, including those governing the scheduling of annual general meetings and the filing of financial statements.
In response to these identified non-compliance issues, BYJU’s is reportedly contemplating seeking compounding from the Registrar of Companies (RoC). This move reflects an effort to address and rectify the lapses within the prescribed legal framework.
The financial results for FY22, released after a nearly two-year delay, disclosed a doubling of revenues to INR 5,014.6 Cr year-on-year, but losses widened substantially by over 81% to INR 8,245.2 Cr. Additionally, MSKA & Associates expressed concerns about BYJU’s ability to continue as a going concern, citing violations of multiple sections of the Companies Act.
The audit report also highlighted challenges such as a significant outstanding amount of nearly INR 3,800 crore at the end of FY22, mostly from loans extended to subsidiaries. Moreover, revenues amounting to INR 260 crore from services sold in Gulf Cooperation Council countries were not recognized, as they did not meet Indian Accounting Standards criteria.
Amidst the financial hurdles, BYJU’s has undertaken a comprehensive restructuring initiative, including substantial layoffs, abandoning expansion plans, and witnessing a substantial drop in valuation by investors like BlackRock. The edtech giant now faces the dual challenge of navigating financial uncertainties and re-establishing its market position, with a rumored rights issue in February aiming for a valuation of $7-8 billion. The coming months will be critical as BYJU’s endeavors to weather the storm in the edtech landscape.
To delve deeper into this topic, please read the full article on inc42