This marks a significant drop of 48% from the projected turnover of approximately Rs 4,400 crore reported in the unaudited results of Think & Learn Pvt Ltd, which runs the edtech company which has been subject to intense scrutiny in recent months for its accounting practices.
ET was the first to report in its Sept. 12 edition on the difference between Byju’s unaudited earnings and the official accounts now signed by startup audit firm Deloitte Haskins & Sells. In the past week, Byju Raveendran, Byju’s founder and CEO, had informed the company’s shareholders of the discrepancies, attributing them to changes in business model due to the Covid-19 pandemic, ET had reported, citing multiple quoted people who were aware of the development.
Raveendran told ET on Wednesday that the company had “recorded significant revenue growth compared to fiscal year 2020, but due to changes in revenue recognition, it is being pushed into the next fiscal year.”
He insisted that “there is no loss of revenue mentioned in the audit report, which will lead to more growth in FY22”.
The Bengaluru-based startup, currently valued at $22 billion, has seen the filing of its audited results delayed by nearly 18 months as Deloitte’s audit department raised concerns about several controversial issues in the company’s accounts.
Discover the stories of your interest
In notes to its audited financial results — reviewed by ET — Deloitte said Byju’s revenues from streaming services (the online courses it sells), previously fully recognized at contract inception, have been adjusted to be taxable recognized on the period of the contract. In addition, the interest on loans – which are granted directly to customers – but are paid by Byju’s on their behalf, has been reclassified from borrowing costs and adjusted to revenue as these payments are in the nature of payments to customers, the audit firm said.
These two major changes in accounting have resulted in a huge drop in revenue for the online tutoring platform and have also resulted in huge losses. Raveendran said the losses of Rs 4,588 crore suffered by the company were split equally between Byju’s and Whitehat Jr, which it acquired in 2020. out); We also completed most of the acquisitions in 2021, which contributed to the losses.”
The educator turned entrepreneur said the past few months have been “challenging” amid the company facing questions as it delayed the filing of its audited accounts.
Last month, the Department of Corporate Affairs (MCA) sent a message to Byju’s requesting it to explain why the financial statements for FY21 have not been filed so far.
“While the audit delay was there, the fraud story was wrong…there was no misreporting as you suggest…I’ve called many investors and no one is concerned because they don’t care about FY21 numbers, but to FY22 watching and FY23 numbers…” Raveendran said.
Byju’s said it has received an unqualified report for fiscal year 2021 from its accountant, Deloitte Haskins & Sells, with no misstatements in its financial statements.
In a press statement on Wednesday, the edtech company said it has clocked Rs 10,000 crore in gross revenue for the fiscal year 2022. To be sure, these are still unverified results.
Changes in the business model
Raveendran said the changes made to the financial data for FY21 were in line with what the auditor deemed appropriate. Some revenue recognition solutions are also based on business model changes, he added. “If there are significant changes to the approval, auditors have to do more work. The initial delay was due to Covid-19 and the second part was exactly the time it took to rework the approval,” he said.
Raveendran said the percentage of credit sales (funded through NBFCs and credit partners) was much higher during Covid, when online learning was in high demand. This led to the revenue recognition being changed for FY21, he said, when asked about the reasons Deloitte was pushing for changes.
“It’s not that we resisted this change in revenue recognition. If you ask me, I’ll be shifting sales from last year to next year at any time. That’s how valuation grows… We also pushed not reporting on aggressive earnings because we’ve been following a similar pattern all along and that’s why you’re seeing this delta,” Raveendran told ET.
Blackstone Payment, Cash Runway, Financing Plan
As for the company’s cash position, Raveendran said the company has plenty of money in the bank even after the payouts to be made to private equity fund Blackstone due to its April 2021 acquisition of Aakash Educational Services Ltd (AESL).
Byju’s had postponed payments to Blackstone and extended the payment deadline until the end of September, people familiar with the matter said. The edtech company must pay an additional $250 million to Blackstone, these people said.
“There is a procedural delay for the Blackstone payouts, according to RBI guidelines that must be met,” Raveendran said. We have a lot of money and in the next six months we will be raising money because there will be a lot of consolidation in the US market that we would like to tap into… cash has never been a challenge for us,” he added.
Raveendran said he has been able to diversify and grow formats as a global slowdown hit the online education sector. ” My investors are still very excited … Many edtech companies flourished during Covid, but there is a global slowdown in the sector. However, we have been able to diversify our offerings … Aakash, Great Learning are both growing very well, the only the cost of acquisition (attracting new students) is challenging in Whitehat Jr,” he said.
Meanwhile, the startup has yet to receive $300 million from the previous round of funding from investors – Sumeru Ventures and Oxshott Capital – from the $800 million round the company announced in March 2022. This investment is not coming through, according to Raveendran who himself has injected $400 million into the company through debt financing from US financiers. The edtech company also raised $1.2 billion in term B loans last November for international expansion. “If you go to investors when you need money, you’ll never get it, no? You have to raise when you don’t need it — that’s when you raise on your terms,” he said, adding that there isn’t a month in which he is not in talks with potential investors.
Speaking about his IPO plans, Raveendran said it is unlikely that he will opt for public market listings in the next 12 months. “The public markets themselves are at a standstill globally. So why go if no one else goes to the market? That’s not just a question for us, but it’s macro-based,” he said, adding that it’s been delayed. by 12 months. The company was looking to acquire US-based edtech company 2U, for which it was finalizing debt financing, but those plans are also on the back burner, people in the know of the matter said.