Deloitte Resigns as Auditor of Byju’s, India’s Most Valued Start-up

Summary:

International accounting firm Deloitte has resigned as the auditor of Byju’s, India’s most valued start-up, due to the company’s failure to deliver any financial results for the year ended in March 2022. Deloitte’s resignation has raised concerns about Byju’s financial reporting practices and transparency. Byju’s has appointed BDO as the new auditor and believes that the transition has been meticulously planned. However, the challenges faced by Byju’s, including converting growing interest in online education into profits and legal disputes over a $1.2 billion term loan, have raised questions about the company’s ability to overcome these obstacles and maintain its reputation and investor confidence.

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International accounting firm Deloitte has resigned as auditor of Byju’s, India’s most valued start-up, saying the education technology company failed to deliver any financial results for the year ended in March 2022.

The 12-month audit was “much delayed,” the accounting firm said in a letter to the Bengaluru-based firm’s board on Thursday. The company’s results were due in September.

The reviewer stated that they “received no communication” from Byju’s on the “audit suitability status of the financial statements and the underlying books and records for the year ended 31 March 2022”, and therefore had not been able to begin its work.

Byju’s hasn’t coped Deloittethe claim that the company had failed to deliver its results. The start-up added that it had appointed accountant BDO to replace Deloitte, saying the companies had a “meticulously planned transition timeline”.

Deloitte’s resignation is the latest blow for the $22 billion digital learning company. Byju’s, which counts China’s Tencent and US hedge fund Tiger Global among its investors, struggled to convert growing interest in online education into profits at the height of the pandemic and became embroiled in a bitter legal dispute in the United States for a $1.2 billion term loan.

Deloitte’s exit is “a very powerful signal,” said Shriram Subramanian, founder and chief executive officer of corporate governance consultancy InGovern. “There’s definitely a mismatch” between Byju’s and Deloitte, Subramanian added.

“We selected BDO as our auditor with great confidence following a well-structured selection process,” said Ajay Goel, Byju’s chief financial officer, who was appointed a month ago. Byju’s previous top financial controller resigned in December 2021.

“The audit of most of the subsidiaries has already been completed,” said Byju’s, “setting a good precedent for the ongoing collaboration with the new auditors.”

Star educator Byju Raveendran’s start-up of the same name has repeatedly run into trouble due to delayed balance sheets. She released her 2020-2021 accounts in September after an 18-month wait after Deloitte asked her to make material changes to her accounting practices. The accounts when filed revealed that the fast-growing company posted losses of more than $560 million.

Byju’s said its accounting process was complicated by a series of acquisitions, including in the United States, as it expanded worldwide.

The delays have been a point of contention with lenders. In 2021, Byju’s took out a $1.2 billion dollar-denominated term loan, with plans to make more acquisitions. Lenders who say they collectively own more than 85 percent of the loan later sued the company, among other charges, over its failure to provide regular financial updates.

Byju’s is fighting back against the lenders, with the start-up’s lawyers saying in a complaint that the lenders’ allegations that Byju’s technically defaulted are “false.”

Former sponsor of Indian cricket team, Byju’s has fired thousands of employees while investors push high-value startups to prove they can turn a profit.