Ed tech firm Byju’s investors passed three resolutions scheduled to be discussed, including the approval of the audited FY22 financials, even as shareholders raised questions on auditor concerns at a long and stormy annual general meeting on December 20.
The meeting, which went on for three hours, was far from a smooth run. The resolutions tabled at the AGM pertained to the company’s statutory auditor - MSKA and Associates, who remained absent in the first half of the meeting.
As it informed shareholders earlier, the company planned to discuss multiple matters, including the approval of the audited FY22 financials with the report of the board, and the appointment of MSKA & Associates as statutory auditors for a five-year term.
The shareholders protested and abstained from passing the resolution, even as Byju Raveendran, Founder and CEO of the company, reassured them stating he would organise another meeting later for a discussion with the auditor.
A senior auditor from the firm later joined to discuss the FY22 financials, as shareholders began dropping from the online meeting requesting to reconvene the AGM.
“Think and Learn, the parent company of BYJU’s, held its Annual General Meeting (AGM) today with close to 60 shareholders in attendance. All the resolutions were passed, including the accounts for FY22… The auditor BDO later answered all questions from shareholders before the company wrapped up the interactive three-hour-long meeting,” said a Byju’s spokesperson, in a statement shared on December 20.
According to the FY22 financials tabled during the meeting, the consolidated revenue from operations stood close to Rs 5,000 crore, with losses crossing Rs 8,200 crore. Earlier in November, the company revealed that its standalone revenue from core business, rose to Rs 3,569 crore, while it recorded an EBITDA loss of Rs 2,253 crore.
While the two resolutions were eventually passed, the auditor flagged matters that raised a series of questions from the shareholders.
Auditor’s concerns
Manish Makhija, a senior executive from the auditing firm, highlighted that the company is facing an issue continuing as an ongoing concern. A going concern is an accounting term for a company that has the resources needed to continue operating for the foreseeable future, in this case, the next 12 months.
Makhija said that, as auditors could ascertain, there is a “significant gap” between the assets and liabilities of the company. He further said that due to continuing cash burn and an obligation concerning Term Loan B, the gap in its resources continues to exist and has become a cause for concern.
However, Makhija also added that Byju’s expects to raise a round soon and also has multiple non-binding offers and the possibility of the sale of its subsidiaries.
Moneycontrol had earlier reported that its early investor Ranjan Pai ploughed in capital, and the company set up an advisory council with veterans such as Mohandas Pai and Rajnish Kumar and elevated Arjun Mohan as CEO. It is also in talks to divest assets such as Great Learning and Epic.
In addition to this, the auditor also flagged concerns about the company’s internal controls. The auditor said that it had also mentioned a disclaimer in its report on Byju’s internal controls falling “significantly short.” It added that the auditor had to resort to a substantial level of individual sample testing to be satisfied with the presented numbers.
Makhija added that while there is an urgent need to beef up controls, he expressed scepticism about the likelihood of this happening until the financial year 2024, considering that the current financial year is already nearing its conclusion.
Meanwhile, during the AGM, Byju’s also sought approval of a remuneration of Rs 5,00,000 for each of the financial years 2021-22, 2022-23, and 2023-24 for B Y & Associates, the cost auditors. This resolution was also passed later.
Byju’s story so far
This comes a month after it announced partial or incomplete FY22 financials only reflecting its core operations, even after a delay of almost a year.
This also comes at a time when India's most-valued startup - Byju’s has been under fire since the start of 2022 for a range of issues, including accounting irregularities, alleged mis-selling of courses, and mass layoffs.
The company has laid off thousands of employees in the last 12 months as it battled a double blow of drying venture capital funding and slowing demand for online learning services. Since then, its investor board members have left too, citing differences with Raveendran.
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