Explainer-Top Indian startup Byju’s battles auditor criticism, board exits
By M. Sriram
MUMBAI (Reuters) – Education technology giant Byju’s, one of India’s biggest startups valued at $22 billion last year, has run into problems, from lawsuits and auditing issues to layoffs and board-room exits.
In a major setback for a company often described as one of India’s most successful startups, its auditor, Deloitte, has quit, throwing a spotlight on its financials and business practices.
Here is an overview of the troubles at Byju’s:
WHY DID DELOITTE, BOARD MEMBERS RESIGN?
Deloitte said in a letter to Byju’s board it was resigning because the company had delayed financial statements for the year ending March 31, 2022. Deloitte said it did not receive necessary documents even after writing several letters to the board. Byju’s has not commented on this.
Last year, Deloitte approved Byju’s 2020-21 accounts after it asked the company to change the way it classifies certain revenue entries.
Separately, three board members of Byju’s – representing investors Peak XV Partners (earlier Sequoia Capital India), Prosus and Chan Zuckerberg Initiative – stepped down, without giving a reason.
WHAT DOES BYJU’S DO?
Byju’s says it is the “world’s largest education technology company”. It offers online tutorials on subjects such as math, physics and chemistry for school students.
The online business boomed during the COVID-19 pandemic. Byju’s valuation shot up from $5 billion before the pandemic to $22 billion in 2022, and it acquired several companies on the way.
It also offers offline classes, executive MBAs for professionals and courses for U.S. students, and says it works with more than 150 million students globally.
MARQUEE INVESTORS, LEGAL TROUBLES
Like other education companies, Byju’s growth slowed as the pandemic abated and students went back offline for classes. It has in recent weeks sacked many employees.
Byju’s counts footballer Lionel Messi and Bollywood actor Shah Rukh Khan as brand ambassadors. Byju’s and its affiliates’ investors include Blackstone, Blackrock, General Atlantic and Tiger Global.
In recent months, investors have cut their valuation estimates. Blackrock, for example, slashed its internal valuation of Byju’s by more than 60% to $8.2 billion, disclosures show.
There are legal headaches too. Byju’s and its lenders are caught up in legal cases in the U.S. over restructuring of a $1.2 billion loan.
WHO ARE BYJU’S FOUNDERS?
Byju’s is run by its founder, Byju Raveendran, and his wife, Divya Gokulnath. Raveendran, an engineer by training, whose parents were teachers, started teaching mathematics to friends, and built the business as its popularity grew.
He launched Byju’s in 2011 and its app in 2015.
WHAT HAS IT SAID?
Byju’s has defended its governance practices and business, saying it is fixing and improving them. It played down Blackrock’s valuation cut, saying in a media interview Blackrock was a minor shareholder with less than 1% of the company. It has also dismissed concern over layoffs, and has said that while it did lay some people off, it hired more.
(Reporting by M. Sriram; Editing by Aditya Kalra)