Is the Byju’s Story Getting Murkier or Has it Cleaned Up?
The company has readjusted revenues and pushed up losses for FY22 but claims that things are quite okay on the home front
Byju’s, India’s most valued start-up, has been making news for mostly the wrong reasons in the recent past. There was the issue of delayed reporting of the financials and then the issue of the company laying off 300 employees from Whitehat Jr, which it had acquired. Now we are hearing that the company is posting massive losses due to some accounting changes.
A report published in the Economic Times quotes founder Byju Raveendran as stating that the company’s losses stood at Rs.4588 crore for FY21, up from Rs.262 crore in FY20, on account of changes made to the accounting processes, based on concerns raised by Deloitte’s audit arm which has since signed off on the accounts for FY 22.
The report quoted Raveendran as saying that the company had posted significant growth in revenues compared to FY 21 but due to the changes in revenue recognition, this would get pushed to the next financial year. So, what do we have now? Per the data, the revenues from operations for FY21 got readjusted to Rs.2,280 crore, a 48% drop over projected numbers of Rs.4,400 crore that was presented in the unaudited results.
The Bengaluru-based edtech startup, which is valued at $22 billion now, did not file audited results for almost 18 months and had to face queries from the Ministry of Corporate Affairs over the delays. Now, Raveendran claims that the delays were real but the narrative around possible fraud was misreporting.
The two changes suggested by Deloitte appear indicative. The first is that revenues from streaming services of the online courses were earlier recognized fully once a contract was signed with a client. Now this has been adjusted to be recognised pro rata over the period of the contract. The second related to interest on loans given to customers but paid by Byju’s on their behalf. This has been reclassified as finance cost and adjusted against revenues, since they are perceived as payments to customers.
Both these conditions appear logical and sound but the question that we still do not have answers to is what percentage of customers actually continue the contract to its end date? And how does Byju’s deal with those that leave midway over issues that could range from quality of courses to students making a wrong choice of courses.
Given that the company is under no obligation to share details of its financials as it is not listed yet, these questions could come back to haunt the company when and if they plan to go public. In fact, another statement ascribed to Raveendran in the report is that the Rs.4588 crore loss incurred by the company would be divided between Byju’s and Whitehat Jr. He claims that the revenue got pushed out while the subsequent costs associated with it did not. The question that springs up automatically is whether this is the reason Byju’s delayed payments to Akash Educational Services, which it had bought for $950 million in April 2021.
All these questions persist at this point in time though Raveendran claims that his investors did not care much for the financials of 2021 and were instead keen on the projected numbers of the current financial year and the one thereafter.
Seems a bit off the mark, doesn’t it? We really can’t get our heads around this statement as well as a few others. But, then all we can do is wait and watch as Byju’s prepares for a stock market listing in 18 to 24 months time. Possibly!