After more than a year of delay, Think and Learn Private Limited, which operates the ed-tech Byju’s, officially submitted the audited results for the fiscal year 2021 (FY21). What the company is, and why is it in the news now? Let us take a deep dive into the issue.
What is Byju’s?
Byju’s is a worldwide educational technology firm based in Bangalore, India. Byju Raveendran and Divya Gokulnath launched it in 2011. Byju’s is valued at US$22 billion as of March 2022, and the company claims to have over 115 million enrolled students.
Why is it buzzing?
After a delay of nearly a year, Byju’s has filed its audited results for the financial year 2021 (FY21). In the audited result, the company saw a fall in revenue by 3 per cent in FY21 to Rs 2,428 crores. Moreover, its losses jumped 20 times to Rs 4,589 crores. The company has come under heightened media and investor attention in recent months after its funders Oxshott and Sumeru Ventures failed to raise $300 million in a round of investment.
Whom did Byju’s blame for the losses?
The company attributed the poor performance to changes in accounting standards that caused income to be deferred to the following years. Byju’s has been under regulatory pressure to produce financial statements after several months of missing the deadline.
Why was there a delay in releasing the audit reports?
The delay was caused by the company’s auditor, Deloitte Haskins and Sells, who requested two revisions to the financials.
The auditor refused to sign off on the company’s results until these revisions were made. Companies with external investors are usually required to follow the auditors’ standards, as investors always view an auditor’s resignation as a red flag.
The auditor demanded two changes;
- The change in the manner of revenue recognition.
- Changing the accounting of interest paid by Byju’s to its lending partners.
The company could show inflated revenue numbers as it recognized its revenue upfront rather than recognizing it over the contract period.
Why is Byju’s falling?
In the results, Byju’s revenue increased by about 67 per cent. Byju’s fast-increasing costs reflected the company’s aggressive growth strategy. Marketing expenses accounted for the majority of the company’s revenue.
Marketing and promotional expenses accounted for Rs 2,250 crores of the overall expenditure of Rs 7,027 crores. Marketing and promotional expenses were Rs 899 crores in FY20, representing a 150% increase.
Employee costs for the ed-tech giant increased from Rs 420 crores in FY20 to Rs 1,943 crores due to Byju’s rapid hiring during the pandemic, a more than 460 per cent increase. Costs have risen even while accounting revenues have fallen by 3%, resulting in the company’s current massive losses.
The escalating losses concerned investors who had watched the company acquire a slew of enterprises over the previous two years, possibly too many.
What are the other problems that Byju’s has been facing?
However, submitting the earnings is just one of Byju’s many issues. It must yet deal with other issues, such as paying the remaining debt to Blackstone for the Aakash transaction.
With the payment date only seven days away, the company may have to postpone the payment once more. Furthermore, Sumeru Ventures and Oxshott have failed to release the blocked funding.
What are the controversies that Byju’s faces?
The company was condemned for imposing rates that only the wealthy could afford. Former salespeople claim the firm pushes its items on low-income parents. It later launched a defamation suit against critic Pradeep Poonia for Rs. 20 crores and later dropped the lawsuit.
The Advertising Standards Council of India (ASCI) ordered Byju’s subsidiary WhiteHat Jr. to remove five TV advertisements owing to misleading advertisements and pushy sales practices. WhiteHat Jr. stated in several social media adverts that a child named “Wolf Gupta” received job offers worth crores. This child was frequently characterized as between the ages of 6 and 14. Investigations eventually proved that everything was made up, and Mr. “Gupta” is a piece of fiction.