India’s most valuable startup seems to be imploding in real time.
An hour after it emerged that three of Byju’s most prominent investors had resigned from its board, its statutory auditor, Deloitte, has also tendered its resignation. “The financial statements of the Company for the year ended March 31, 2022 are long delayed,” Deloitte said. “We have also not received any communication on the resolution of the audit report modifications in respect of the year ended March 31, 2021. As a result, there will be significant impact on our ability to plan, design, perform and complete the audit in accordance with the applicable auditing standards. In view of the aforesaid, we are tendering our resignation as statutory auditors of the Company with immediate effect,” they added.
Just an hour ago, it had been reported that three Byju’s board members had resigned from the company. Among the board members who’ve resigned are GV Ravishankar, MD at Peak XV Partners, Russell Dreisenstock of Prosus (previously Naspers) and Vivian Wu from the Chan Zuckerberg foundation. Byju’s board had comprised of these three investors, Byju’s CEO Byju Raveendran, his brother Riju Raveendran, and his wife Divya Gokulnath. After the resignations, only Byju Raveendran, his brother and his wife are left on the board of the $22 billion ed-tech giant.
These resignations, seemingly in unison, are the latest jolt for Byju’s, which has been lurching from crisis to crisis over the last year. Byju’s had delayed filing its FY21 financial results for so long that even the Indian government commented on the issue. The results hadn’t made for pretty reading — Byju’s had lost Rs. 4,588 crore in FY 21 — and Byju’s had then proceeded to lay off thousands of employees. Around this time, questions had been raised in Indian parliament about Byjus’ alleged misselling of courses to economically vulnerable parents, and even the country’s child rights body had summoned CEO Byju Raveendran for questioning.
But things kept getting worse — not long after, the Enforcement Directorate had raided CEO Byju Raveendran’s home, and seized incriminating documents over violation of foreign exchange laws. Since then, Byju’s has seen its valuation marked down by as much as half by several investors, and the company had tried to restructure its loan obligations. Byju’s had then been sued by its lenders, but it had gone on to sue them back and refused to pay back its loans amounting to $1.2 billion. Byju’s has, since then, laid off more employees, not filed its FY22 financial results, and has now seen three prominent board members resign.
While it’s unclear why Byju’s board members and statutory auditor have resigned, it’s an unusual move that signals there might be serious issues afoot at Byju’s. Boards are constituted to protect shareholder and investor interests, and board seats give investors a say in the running of the companies they’ve put their money into. Statutory regulators are legally responsible for the company’s financial statements. For these people to suddenly resign from their positions could indicate that they do not wish to associate with the company any longer.
This could be a major blow to Byju’s, and jeopardize its future fundraising prospects. But it could also end up being a blow to India’s startup ecosystem as a whole — at $22 billion, Byju’s is India’s highest-valued startup, and for it to create enough controversies to make Netflix producers sit up and take notice might not be the best advertisement for India’s fledgling startup industry.