The central government has ordered an inspection into the account books of ed-tech start-up Byju’s, which has been rocked by the resignation of its auditor and three board members last month, citing people familiar with the matter news agency Bloomberg said.
The sources privy to the development told Bloomberg that the Ministry of Corporate Affairs (MCA) has sought a report in six weeks. According to the report, the inspection follows an internal assessment of the company’s state of affairs and, based on findings of the inspection, the government will decide if the matter needs to be escalated to the Serious Fraud Investigation Office (SFIO).
The inspection by MCA could be a new headache for Byju’s, valued at $22 billion in the last funding round, as it restarts negotiations to restructure its $1.2 billion term loan after breaching certain terms of its debt agreement. Once emblematic of India’s booming start-up scene, the company has cut thousands of jobs and is seeking to raise more than a billion dollars to tide over financial difficulties.
A spokesperson for Byju’s didn’t respond to Bloomberg's email and text messages seeking comment. An email to the Ministry for Corporate Affairs wasn’t immediately answered.
Deloitte Haskins & Sells resigned as Byju’s auditor last month citing a delay in submitting financial statements. Representatives of three influential backers — Peak XV, Prosus NV, and the Chan-Zuckerberg Initiative — quit Byju’s board in the same week, underscoring a rapid erosion of trust within the company’s ranks.
Byju's Founder and CEO Byju Raveendran last week held an emergency general meeting (EGM) to address shareholders on the challenges faced by the edtech unicorn. According to a news report, Raveendran during the meeting announced the formation of a Board Advisory Committee (BAC) to provide guidance on board composition and governance structure.
Further, the firm is in advanced talks with prospective new shareholders for a $1 billion fundraising round in an attempt to sidestep a revolt by some investors. Byju's is offering benefits to the potential investors, including preferential treatment in the case of liquidation, the report said, adding that none of its existing shareholders have a so-called liquidation preference.