The CA Institute expects the Financial Reporting Review Board (FRRB) to complete its ongoing investigation on BJYU’s, the world’s most valuable EdTech start-up, before this year end, said Aniket Sunil Talati, President, ICAI.
The 38-year-old Talati, one of the youngest presidents at the ICAI, which is now the world’s second-largest accounting body, said the FRRB had taken up this case late last year and is expected to reach finality before the end of this year.
Talati said one of the focus areas for him this year would be to enhance and reinforce public confidence in the chartered accountants profession and the regulatory oversight around them. He highlighted that the FRRB, a non-standing committee of the CA Institute’s council, had last year reviewed more than 101 financial statements. Of that, 30 per cent was issued advisories and about 18 per cent referred to disciplinary committee for disciplinary action, he noted. “I want to showcase the work FRRB has been doing,” Talati added.
What FRRB is doing?
FRRB had last year taken up EdTech major BYJU’S financial statements and its allegedly irregular accounting practices for review. This comes in the wake of several complaints received by the Ministry of Corporate Affairs (MCA), Serious Frauds Investigation Office (SFIO) and the CA Institute in the recent months, over the alleged irregular accounting practices at BYJU’S.
The start-up had also delayed filing of its FY21 results (filed in October this year), prompting the MCA to demand an explanation on the same. The Ministry reportedly sent its letter on this issue in August last year.
BJYU’s was under the regulatory scanner because of a 22-month delay in submitting financial reports. The current legal framework says private companies need to file their financial statements with MCA within 30 days of holding the annual general meeting (AGM). The AGM has to be held within six months of the end of the financial year.
Currently, FRRB has powers to review the general-purpose financial statements either suo moto or on a reference made to it by any regulatory body such as RBI, SEBI, Insurance Regulatory and Development Authority, MCA etc. The FRRB also reviews the general-purpose financial statements of enterprises relating to which serious accounting irregularities have been highlighted by media reports.
One of the accounting practices adopted by BYJU’S that came under scrutiny was in the area of ”revenue recognition”. It was alleged that the company’s practice of recognizing revenues from “streaming services” upfront and in full, was not consistent with the generally accepted accounting principles. The more prudent way and the right manner would be to recognize the revenue over the period of delivery of service, critics highlighted.
BJYU’s had recorded a loss of ₹4,588 crore in financial year 2020-21 (FY21), 19 times more than the preceding year.
The edtech giant, which was last valued at $22 billion, earned ₹ 2,428 crore in revenues in FY21. Its adjusted revenue in FY20 stood at ₹ 2,511 crore and the adjusted loss was ₹ 300 crore.
In mid-October last year, BJYU’s had raised $250 million in a new funding round from existing investors, including the Qatar Investment Authority at $22-billion valuation. This fundraise came a week after the start-up had announced the lay off of more than 2,500 employees.
Last year Lok Sabha member Karti Chidambaram had flagged concerns about the financials of the edtech startup, which has significantly expanded its operations in recent years. He had also written to the ICAI (Institute of Chartered Accountants of India) to review the company’s financials.
It maybe recalled that Byju’s—Founded in 2015 and formally known as Think & Learn Pvt. — had last year shelved plans for an initial public offering as global markets slumped.
Meanwhile, BJYU’s is now reportedly looking to raise as much as $250 million through the issuance of convertible notes by its tutoring service unit, Aakash. Byju’s had acquired the three decade old Aakash for about $950 million in 2021.