Power of CA Signature: BYJU’S vs DELOITTE “Unicorn Byju’s financial position is still not closed…..”
Ken pointed out that Byju’s auditor, Deloitte, has not signed off on financial statements for FY 20-21.
There are some possible irregularities that cause the auditor to hesitate to sign. Reasons highlighted in the news Concern about refunds, loan guarantees, and unusual revenue recognition practices.
Today Byju’s (the world’s largest education company) is valued at “$22 billion”. With more than half the VCs in touch with Byju, any adverse comment in the audit is going to do some real damage to the startup sector in India.
You see, this is the power of the CA signature.
An auditor’s potential concern over financial statements shook the entire startup community.
The work you do as a CA will form the basis of important decisions for investors, shareholders, and the government. So, do your job with full dedication and professionalism.
Also check: Top 10 Expenses for Starting a Consultancy Firm
Deloitte has not signed Byju’s financial statements for 2020-21
Deloitte has not signed Byju’s financial statements for 2020-21. He has also not submitted the financial report for 2021-22.
- While dismissing Byju’s concerns, if it fails the acid test, it could cost the entire $3.5B Indian tech industry, seasoned investors, upcoming founders included.
- Byju’s is getting late in filing. Subsequently, its books may reveal a number of inconsistencies.
- Accounting issues, difficult lending arrangements, and the constant need for cash are playing together.
- The numbers reported appearing to be distorted for more than one reason. Bundling hardware like memory cards and tablets into your revenue calculations may have been done to augment them. They accounted for 63% of their revenue in 2020 with an annual growth of 55%.
- Byju’s and its controversial subsidiary WhiteHat Jr. take out loans to cover prices and provide a 100% default guarantee to lending partners. This risky practice is disliked.
- Byju says securitization and First Loss Deposit Guarantee (FLDG) are industry-accepted practices. If not for FLDG, most the consumer parents would not have been able to avail of personal loans from banks and financial institutions at affordable rates.
- Byju says the late filing is not a cause for concern.
- Byju’s, a giant valued at $22 billion, has raised over $6 billion in its 12 years of existence. It has spread to new countries including the UK, Australia, Brazil, Indonesia, and Mexico. The revenue isn’t even $1B. Ideally, the revenue multiplier in the edtech space, 19x for larger companies, should be at least $1B.
- Embracing not just e-learning companies but professional acumen and augmented reality start-ups, it has been on acquisitions since the pandemic. It is eyeing a public market debut soon at a massive $48B valuation.
- Delay is not a red flag, it said. Many of these acquisitions are being thoroughly investigated and the lack of audit bandwidth for the company has grown exponentially. We may actually see that report in a few days.
- Byju’s made at least 10 acquisitions in 2021 for a cumulative transaction value of approximately $2.5 billion.
- It has completed the consolidation of businesses and will file its pending financial results in June.
- The response comes after The Cane reported that Byju had not filed its financial statements for 2020-21 and 2021-22 because auditors were hesitant to sign Deloitte due to problems in refunds, loan guarantees, and unusual revenue recognition practices. doing.
- Byju says they adhere to the highest standards in all business practices, from student success to governance and accounting standards. These practices have been in operation for the past six years, audited by Deloitte, and records submitted to all relevant authorities over these years.
- Attributing the delay to a series of acquisitions made by Byju’s in 2020 and 2021, they reiterate that several acquisitions were made in 2020-21 and each had a different accounting style and year. They have completed the consolidation of businesses and will file their financial results this month.
- How Byju’s record of revenue from the sale of hardware (memory cards, tablets, etc.) and software (apps and online classes) could have led to a discrepancy in the edtech firm’s financial statements.
- Credit guarantee is the second issue that has been highlighted. Byju’s offers a 100 percent default guarantee to some of the lending partners that offer loans to its customers. Such a guarantee is called a First Loss Default Guarantee (FLDG). If the customer fails to repay, Byju pays the bill by raising cash from its own ledger or from private investors.
- It said working with lenders, which help consumers finance a course, allows Byju’s to book revenue in advance.
- So far, Byju’s has raised over $6B in funding, with founder Byju Raveendran investing $400M in the latest $800M funding round in March 2022 at a valuation of $22B.
- The refund guarantees offered by Byju and its subsidiaries may cause problems if the actual refunds exceed the budgeted amount.
- Byju’s is planning to IPO in the US through SPAC. In such a situation, Deloitte can take a cautious approach.
- Now the Indian ed-tech sector is battling a bad funding season, which has led to at least two start-ups shutting down their operations – Uday and Lido Learning.
- Edtech unicorn Vedantu and Unacademy have laid off 600-600 employees. At least 800 employees have resigned at Byju’s-owned White Hat Jr. The total edtech layoffs have crossed 3,500 in the last two months.
What are your thoughts on this? Are there really some serious irregularities in Byju’s financial position?
Let me know in the comments
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