BDO (MSKA & Associates), which was appointed as the auditor of Byju’s and Aakash Educational Services last year, has resigned from the embattled edtech amid financial and governance concerns. BDO was appointed for a period of five years after Deloitte had left the company citing several issues with the company’s financial reporting.
The resignation letter from BDO subsidiary MSKA pointed out several key issues with Byju’s. These included significant delays in financial reporting, insufficient management support, and doubts about the company’s capacity to recover substantial outstanding payments from a Dubai-based entity, Moneycontrol reported.
MSKA & Associates stated in their resignation letter that a questionable transaction involving Dubai-based reseller More Ideas General Trading LLC was reported to the Corporate Affairs ministry on September 2. The transaction in question pertains to the recovery of approximately Rs 1,400 crore from the reseller.
The letter also stated concerns about various ongoing litigations against Byju’s and its board, including initiation of liquidation proceedings by lenders, and allegations of oppression and mismanagement by minority shareholders.
MSKA noted instances where Byju’s failed to share critical information, such as notices for EGM and insolvency proceedings, with the auditing team.
This development is particularly significant as Byju’s, previously valued at $22 billion and once considered India’s most valuable startup, is currently facing a string of challenges. These challenges include a recent Supreme Court ruling to recommence insolvency proceedings against the startup.
The board of Byju’s initially engaged MSKA & Associates on August 2, 2023, to fill a casual vacancy that had arisen due to Deloitte’s exit. Subsequently, the firm was re-appointed on December 20, 2023, as the company’s statutory auditor during the Annual General Meeting for a duration of five years, spanning from FY23 to FY27.
BDO was appointed at a time when Byju’s had postponed submitting its financials for FY22 with regulators for several months. This action led Deloitte to notice discrepancies and eventually resign.
Post the audit takeover by MSKA in August 2023, Byju’s parent company, Think & Learn Pvt Ltd, disclosed a consolidated loss of Rs 8,245 crore against operating revenue of Rs 5,014 crore for the fiscal year concluding on March 31, 2022.
Other cases
The Supreme Court has agreed to list for an early hearing the appeal of US-based creditor Glas Trust Company LLC against the judgment of the NCLAT. The NCLAT had previously stayed the insolvency proceedings against ed-tech firm Byju’s and approved its Rs 158.9 crore dues settlement with the BCCI. A bench comprising Chief Justice D Y Chandrachud and Justices J B Pardiwala and Manoj Misra was urged by senior advocate NK Kaul, representing BYJU’s, for an expedited hearing of the case.
Senior advocate Kapil Sibal, representing the US-based creditor, also requested an early hearing.
On August 22, the bench rejected an interim order to prevent the committee of creditors (CoC) from conducting any meetings related to the insolvency proceedings against BYJU’s. The court then scheduled the plea for a final hearing on August 27.
In a major setback to Byju’s, the apex court issued a ruling on August 14 that halted the decision of NCLAT. This ruling overturned the insolvency procedures that were initiated against the prominent educational technology company and sanctioned its settlement of Rs 158.9 crore in debt with the Board of Control for Cricket in India (BCCI).
The NCLAT’s decision on August 2 was a major source of reassurance for Byju’s, as it resulted in the restoration of founder Byju Raveendran’s authority within the organisation.
