InvestorQ : Why has the Ministry of Company Affairs pulled up Byju’s?
manisha Kolvenkar made post

Why has the Ministry of Company Affairs pulled up Byju’s?

Crowny Pinto answered.
2 months ago

For almost 5 years it did appear that Byju’s could not put a single wrong step. From expanding its edtech franchise to raising funds at will to making bold global acquisitions; Byju’s did everything right, and they did it with aplomb. However, things have changed after normalcy returned to operations post COVID. Children are back to classrooms and that has led to falling demand for online courses. That has hit valuations and also resulted in tightening of the fund flow scenario for the edtech companies in India.

In addition, Byju’s and other edtech companies were also in the news for being at the forefront of lay-offs in the digital industry. The edtech space saw bulk of the lay-offs in this segment as companies tried to align their costs to revenues to reduce the cash burn. Amidst all these challenges, Byju’s is up against a major compliance and regulatory issue. This time around, it pertains to the non-filing of the financial results and other statements for fiscal year FY21, even after 17 months had elapsed since the year end.

Remember, most listed companies in India have finalized the FY22 accounts more than 2 months back and Byju’s is yet to file FY21 numbers. Byju’s can take umbrage in the fact that it is a private limited company but even such private limited companies need to file these returns latest within 7 months of the end of the fiscal year. In the case of Byju’s it is already 17 months elapsed. That does not look good for a start start-up, backed by formidable PE names and which is on track for its IPO next one year. That is the real issue now.

The Ministry of Corporate Affairs (MCA) is not too pleased with this laxity from such a high profile company and has specifically written to the promoters of Byju’s asking for an explanation of this inordinate delay. The reason proffered by Byju’s, hardly acceptable, is that it was still consolidating the spate of acquisitions done in FY21. But 17 months is still too long a time period. In early July, Byju’s promised to file the annual results for FY21 within 10 days. However, it has reneged again and there is no progress even after 50 days.

Byju’s claims to have sent its response to MCA, but details are not yet available. Byju’s used to employ over 50,000 employees but laid off nearly 1-2% of its workforce to prevent cash burn. However, informal sources claim the actual layoffs are much higher in the edtech sector. At one point, Byju’s used to guzzle capital and acquire companies. Both have stopped for now. With students getting back to classrooms, the old argument in favour of edtech stocks is hardly relevant any longer.