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Business News/ Companies / Company Results/  No rosy picture as Byju's finally files its FY22 earnings

No rosy picture as Byju's finally files its FY22 earnings

In a regulatory filing, the edtech company's auditor said a “material uncertainty” existed and flagged “significant doubt on the company’s ability to continue as a going concern”

Byju's said its Whitehat Jr. and Osmo subsidiaries contributed to about 45% of its losses. (Bloomberg)Premium
Byju's said its Whitehat Jr. and Osmo subsidiaries contributed to about 45% of its losses. (Bloomberg)

BENGALURU : Edtech giant Byju’s faces “material uncertainty" and doubts on its ability to continue as a going concern, the company’s auditor said in its 2021-22 earnings report, as what was once India’s most-valued startup struggled in a year that was among the best for India’s edtech sector.

Losses at the Byju Raveendran-led company more than doubled to 8,245 crore from 4,564 crore a year ago, while consolidated income rose to 5,298.43 crore from 2,428.39 crore.

MSKA & Associates, the audit arm of accounting firm BDO Global, pointed to continuing net losses from operations, accumulated losses, debt-related risks resulting from its outstanding $1.2 billion overseas loan; however, it added several disclaimers, finally concluding that Byju’s continued to be a going concern in 2021-22.

Byju’s total financial liabilities added up to 17,678 crore in 2021-22, up from 3,116 crore in 2020-21, the auditor noted. This largely includes ‘non-current liabilities’ including borrowings of 8,828.65 crore—the amount it borrowed abroad. “These events and conditions cast significant doubt on the company’s ability to continue as a going concern," the auditor said in its comments, as part of Byju’s 2021-22 filing with the ministry of corporate affairs.

Byju’s India chief financial officer Nitin Golani, however, pointed to a subsequent section of the auditor’s opinion in the filing that stated the company’s management “has undertaken various measures to improve its operating financial condition and is also in the process of securing necessary funding arrangements and exploring the sale of assets as needed, and hence is confident regarding the future viability of the firm."

The auditor noted that Byju’s 2021-22 earnings had been “prepared on a going concern basis" as “basis a legal opinion, the management is of the view that it is unlikely that the (term loan B) will be required to be paid in the foreseeable future". The auditor issued Byju’s an unqualified or unmodified report for 2021-22, the company said.

The auditor cleared Byju’s as an ongoing concern with a disclaimer, said Jidesh Kumar, managing partner at King Stubb & Kasiva Advocates and Attorneys, a corporate law firm.

“The auditor’s independent view is that it cannot continue as an ongoing concern. However, when the company supplied them with a legal opinion stating that loans need not be repaid immediately, the auditor issued a report stating that it can be dealt with as a going concern. In my view, Byju’s auditor makes it a ‘going concern’ with a disclaimer", Kumar said.

He added that the primary impact for the company would be in securing debt, in light of the auditor’s report.

“Various indicators, including regulatory dues, debt management, repayment schedules, taxes, salaries, etc., would likely have been considered in this assessment. Should the auditors identify substantial doubt based on the evidence, it is incumbent upon management to furnish them with plans aimed at mitigating the causes of such doubt and to evaluate the likelihood of success of those plans. After a thorough consideration of all information, the auditors would subsequently determine whether substantial doubt persists," Kumar said.

A Bloomberg report on Tuesday said Byju’s has approached its existing investors to raise $100 million at a $2 billion valuation, a steep discount to its peak valuation of $22 billion.

Byju’s said the company had worked at reducing its losses, adding it made two acquisitions in 2022-23, after buying nine companies in the previous fiscal year. Of these nine, two companies had performed poorly, Golani said, adding the company was not making further investment in WhiteHat Jr and Osmo.

Golani said Byju’s 2022-23 results, which he expects to file over the coming months, are far better in terms of margins than the latest figures. The company is aiming towards profitability, he said.

“While we are happy that our total income has grown by 2.2x, we are also aware of our underperforming businesses like Whitehat Jr. and Osmo, which contribute to 45% of the losses," Golani said. “...these businesses were scaled down significantly to cut losses in the subsequent years while other businesses continue to see growth," he said.

Whitehat Jr., which Byju’s acquired for about $300 million during its heydays in 2020, accounted for a substantial portion of the loss in FY22. The subsidiary reported revenue of 295.11 crore for FY22, down from 326.67 crore in FY21. Whitehat Jr. which cost Byju’s nearly 220 crore every month towards marketing expenses, ended up reporting a pre-tax loss of 2,877 crore for FY22, bigger than its loss of 1,549 crore in the year before.

At US-based Osmo, which Byju’s acquired in 2019 for about $120 million, revenue dropped to 553 crore in FY22 from 600 crore in the previous year, while its pre-tax loss soared to 852 crore from 191 crore earlier.

The earnings filings come after a lengthy dispute with its lenders following several technical defaults. Since June, Byju’s has stopped servicing interest payments on its loans and has been trying to negotiate repayments with lenders.

Once India’s most-valued startup, Byju’s has recently struggled with challenges including difficulties in raising capital, meeting payroll obligations, and managing debt exceeding a billion dollars.

Byju’s chief financial officer Ajay Goel left the company less than seven months after taking up the role, returning to Vedanta in late October. This followed the high-profile departures of Byju’s auditor Deloitte and three key board members in June.

Byju’s investor Prosus publicly criticized the Bengaluru-based startup in July for insufficient disclosures and disregarding investor advice. Earlier this month, asset manager BlackRock reduced its valuation of Byju’s by about 95% to $1 billion, according to a TechCrunch report.

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Published: 23 Jan 2024, 03:36 PM IST
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