Byju’s, once hailed as India’s most valuable startup, is grappling with a deepening crisis following the resignation of its auditor, MSKA & Associates. This departure raises alarming questions about the edtech giant’s financial health and governance practices.
The resignation letter from MSKA, a BDO subsidiary, paints a troubling picture of Byju’s internal challenges. Key issues highlighted include significant delays in financial reporting, inadequate management support, and a dubious ability to recover a substantial Rs 1,400 crore from a Dubai-based reseller, More Ideas General Trading LLC. The resignation letter was officially submitted to the Corporate Affairs Ministry on September 2, adding to the mounting scrutiny surrounding the company.
BDO’s exit is particularly concerning as it follows the departure of Deloitte, which had previously cited similar concerns regarding Byju’s financial reporting. MSKA’s resignation exposes ongoing issues that were not adequately addressed, including a series of unresolved litigations and the initiation of liquidation proceedings by lenders. Furthermore, Byju’s faced allegations of oppression and mismanagement by minority shareholders.
The audit firm also expressed frustration over Byju’s lack of transparency, particularly regarding critical information such as notices for Extraordinary General Meetings (EGM) and insolvency proceedings. These concerns were compounded by the company's recent Supreme Court ruling, which ordered the recommencement of insolvency proceedings.
Byju’s, once valued at $22 billion, has been under increasing pressure. The company, which appointed MSKA as its auditor on August 2, 2023, had previously faced delays in submitting its financials for FY22. This led Deloitte to resign and MSKA to step in, only to uncover more issues. Byju’s reported a staggering consolidated loss of Rs 8,245 crore for FY22 against an operating revenue of Rs 5,014 crore.
In addition to these financial woes, Byju’s is entangled in legal battles. The Supreme Court has agreed to expedite a hearing involving a US-based creditor, Glas Trust Company LLC, challenging the NCLAT's decision that had temporarily stayed insolvency proceedings. The court also recently reversed a decision that had reinstated founder Byju Raveendran’s authority.
