The inspection initiated by the ministry of corporate affairs (MCA) on the edtech firm Byju’s is still at “a preliminary stage,” said a source close to the company.
“The registrar of companies has sought the information from Byju’s related to some non-disclosures in the balance sheet. If any non-compliance is found in the books, the company will be served a show cause notice. The case is still at Section 206 stage,” said the source.
Sections 206-209 of the Companies Act give power to MCA to seek information from company officials, inspect their books and conduct inquiries. During the course of investigation, if a major fraud is found, the MCA’s regional office will write to the central government who would then involve the Serious Fraud Investigation Office.
Reports suggested that MCA has recently asked its field officers to expedite the inspection on Byju’s books and submit the report. Last July, the MCA has reportedly ordered inspection of Byju’s account books after its auditor Deloitte Haskins & Sells LLP resigned citing a significant delay in providing audited financial statements for FY22.
In January, Byju’s parent company Think & Learn Pvt Ltd reported a consolidated loss of Rs 8,245 crore (on operating revenues of Rs 5,014 crore) for the same financial year.
A parallel investigation on Byju’s books, which was initiated by the Financial Reporting Review Board of e Institute of Chartered Accountants of India in August 2023, will reveal the veracity of the allegations of financial reporting irregularities.
The conflict between Byju’s founder and investors recently came out in the open at the emergency general meeting (EGM) where a group of investors led by Prosus Ventures and Peak XV Partners voted to remove the founder CEO Byju Raveendran from the board over alleged “mismanagement and failures”. The EGM, which was skipped by Byju and his family members, also voted to remove the current management, reconfigure the board and sought a forensic audit of the company’s acquisitions.
A poster boy of the edtech space, Byju’s tumultuous journey has led to a 99% drop in its valuation – from $22 billion in July 2022 to around $200 million now.