Lawmaker Karti P Chidambaram asks ICAI to investigate Byju's finances

Says nearly 81% of Byju's operating revenue for FY2021 constitutes sale of products like tablets, SD cards and laptops, which is a blatant misrepresentation of facts to classify hardware as edutech

Karti P Chidambaram, Member of Parliament, on Friday said he has written a letter to the Institute of Chartered Accountants of India (ICAI), urging it to probe the financial statements of ⁦the edtech giant Byju’s.

In a letter addressed to ICAI President Dr Debashis Mitra, Chidambaram said Byju’s has released FY21 results after an 18-month delay, nearly missing four deadlines. The Financial Reporting Review Board (FRRB) under ICAI has the power to review general purpose financial statements of enterprises and auditor’s report thereon relating to which serious accounting irregularities have been highlighted by the media reports.

“I would like to bring to your attention a number of red flags in Byju’s financials for FY2021. Analysing how Byju’s earns its money and where it spends it is puzzling. Nearly 81 per cent f its operating revenue for FY2021 constitutes ‘sale of edtech products’,” said Chidambaram in the letter, that was posted by him on Twitter. “This includes the sale of tablets, SD cards, and laptops. For an edtech company, is it not a blatant misrepresentation of facts to classify the hardware as edutech.”

Byju’s recently said that it is set to lay off nearly 2,500, or 5 per cent, of its 50,000 employees as part of an “optimisation” plan.

“In the light of the aforementioned issues, it is clear that this company is not in a sound state of financial health,” said Chidambaram. “ In the interest of the consumers and the company’s employees, I urge ICAI to review Byju’s financial statements.”

On the expense front, Chidambaram said 60 per cent of the costs related to employees have been recognised as capital expenses rather than operational costs. He said if these costs were counted as a direct expense, instead of a capital expense, Byju’s total loss for FY 2021 would have gone over Rs 5,000 crore. “Such irregular accounting practices fail to give a clear picture of Byju’s income, expenses, and losses,” alleged Chidambaram.

Byju’s booked a loss of Rs 4,588 crore for the financial year ended March 31, 2021, 19 times more than the preceding year, according to its latest financial report, which was released by the firm last month. The edtech giant, which was last valued at $22 billion, earned Rs 2,428 crore in revenues in FY21. Its adjusted revenue in FY20 was Rs 2,511 crore and the adjusted loss was Rs 300 crore.

Chidambaram said that previously, Byju’s was recognising revenues from ‘streaming services’ upfront and in full, on the commencement of a contract. He said it is a standard practice that subscription revenues’ can’t be recognised upfront, and has to be recognised over the period of the delivery of the service. “It warrants opening up Byju’s previous financial statements as well,” said Chidambaram.

However, Byju’s had said it did not keep to three or four deadlines, all self-imposed, for announcing its results, reportedly because its auditor was not signing off on the accounts. It said that the FY21 numbers had received an unqualified report from the audit firm, Deloitte Haskins & Sells.

Even as Byju's is set to lay off nearly 2,500, or 5 per cent, of its employees as part of an “optimisation” plan, the firm said it is planning to go on a hiring spree. It plans to hire 10,000 teachers in the next six months, adding to the current strength of 20,000 teachers.

Byju Raveendran, founder and CEO of Byju’s recently told employees, that the firm has already started shifting its focus towards profitable growth. He said revenue of $2 billion was within sight of the firm and that the firm’s FY22 revenue was nearly Rs 10,000 crore, or $1.3 billion. “This means we are now a billion-dollar-plus revenue company,” said Raveendran, in a letter addressed to the employees.