Last evening, Byju’s, the world’s most valuable edtech startup, released its financial statements for the year ended March 2021, after a delay of one-and-half years. This was after months of working with its auditor Deloitte to get a sign-off.
In interviews with The Economic Times and Moneycontrol, its co-founder and chief executive officer (CEO) Byju Raveendran said the last six months have been difficult for the company and that he has had sleepless nights as a result of all of the critical media reports that have raised many concerns about the operations of India’s most valuable startup.
In June, The Ken first reported that Deloitte had held off from approving approving The Ken An audit reckoning—the $22B Byju’s juggernaut is yet to get Deloitte’s approval Read more Byju’s financial statements over its revenue recognition practices.
The year ended March 2021 ought to have been a good year for the Sequoia Capital- and General Atlantic-backed company. It was a year when the pandemic became the tailwind that propelled edtechs. Byju’s has raised US$2.5 billion since the beginning of the pandemic, sending its valuation soaring from US$8 billion to US$22 billion. In this brief period, between 2020 and 2021, its users grew from 64 million to 110 million. But Byju’s revenues had little to show for it.
The company’s consolidated revenue from operations grew a mere 4% to Rs 2,280 crore (~US$287 million), while losses ballooned 15X to about Rs 4,500 crore (US$566 million) due to a significant increase in employee-benefit expenses and promotional expenses—Byju’s has been sponsoring India’s cricket team since 2019.
The financial statements mark a turning point in Byju’s fate as it has been forced to change how it records revenue. The firm, which sells multi-year products, recognised its revenue upfront, which made Byju’s seem bigger than it was.
“Revenue recognition is part of CEO training in all global companies,” the founder of a global edtech tells The Ken. “That’s because the CEO and the CFO (chief financial officer) can collude and engage in intellectual dishonesty,” he adds. “It is not blatant fraud because it’s not stolen money or anything of that sort, but it is wrong to represent that view of the revenues of a company to a bunch of people that are not insiders to your industry.”
But all that changed this year.