MP Karti Chidambaram urges investigation into Byju’s financial statements and points out irregularities

Startups are often at odds with competitors, customers and even investors, but India’s most valuable startup seems to have a unique adversary: ​​a militant MP.

Shivaganga MP Karti Chidambaram, son of former finance minister P Chidambaram, has written to the Institute of Chartered Accountants of India urging them to look into ‘red flags’ in Byju’s financial statements. BYJU’s, an Indian educational technology company, released its FY21 results after an 18-month delay, missing almost four deadlines. I would like to draw your attention to a number of red flags in BYJU’s finances,” he wrote.

Chidambaram said 81% of Byju’s operating revenue was under “sales of ed-tech products”, but said that figure included sales of tablets, SD cards and laptops. “For an EdTech company, isn’t it a blatant misrepresentation of fact to classify the material as edutech?” He asked.

More seriously, Chidambaram alleged that 60% of Byju’s employee-related costs were recognized as capital expenditures rather than operational costs. “If these costs were counted as a direct expense. instead of a capital expenditure, BYJU’s total loss for the financial year 2021 would have exceeded Rs. 5,000 crores. Such improper accounting practices do not paint a clear picture of BYJU’s revenues, expenses and losses,” Chidambaram’s letter reads.

Chidambaram also raised a point that had been raised several times before on social media, namely how Byju’s immediately recognizes revenue from subscriptions where services are provided over multiple years. This may artificially inflate Byju’s income for the current year. “Previously, BYJU recognized revenue from ‘streaming services’ up front and in full, at the start of a contract. It is standard accounting practice that subscription revenue cannot be recognized at the outset. advance and must be recognized over the period of service delivery,” he wrote.

“(These issues) also justify the opening of BYJU’s previous financial statements. BYJU’s has laid off nearly 2,500 of its employees, according to media reports. sound financial health. In the interests of consumers and company employees, I urge ICAI to review BYJU’s financial statements,” he concluded.

This is not the first time that Karti Chidambaram has highlighted issues with Byju’s. In December last year, he spoke about Byjus’ alleged predatory pricing from the floor of Parliament. “(Companies like Byju) are now engaging in predatory marketing practices in which they prey on the poorest people who yearn to give their children a better education, who want to complete the education they are not getting. in public schools. They force them to buy these courses and they automatically debit their bank accounts. Even if the parents want to stop these courses, they cannot stop these automatic withdrawals. (These companies) become like loan sharks, and they sell these courses of strength, ”he alleged.

Chidambaram then almost said that the society he was talking about was Byju’s. “This company is now sponsoring the Indian cricket team. You know exactly who I am talking about. This company is worth $21 billion. It is essential that there are concerted efforts to monitor these companies,” he said.

Byjus’ financial statements had come under intense scrutiny lately. After the company delayed filing its audited financial statements by 18 months, the Ministry of Corporate Affairs stepped in and asked the company why it was not filing its financial statements. There had also been a lot of speculation on social media that Deloitte, its auditor, was unwilling to sign its financial reports. And with an MP now urging the Association of Chartered Accountants of India to probe his statements, the noise around Byju’s finances is likely to intensify in the coming months.

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