Government report finds corporate governance lapses, no financial fraud, at Byju’s

A year-long investigation by the government has found that the edtech firm Byju’s did not siphon off funds or manipulate accounts. However, the report filed by the government has found that the company did go through lapses in its corporate governance structure. 

The probe ordered by the Ministry of Corporate Affairs (MCA) has come to the conclusion that the allegations raised against the edtech firm were “unsustainable” and as such, the firm is not recommended to be referred to the Serious Fraud Investigation Office (SFIO), according to people aware of the matter.

MCA’s investigation was conducted after complaints were filed by the National Commission for Protection of Child Rights (NCPCR) and the Registrar of Companies (ROC). The complaints indicated that Byju's arm twists its customers for continuing with its products or services, and doesn't issue refunds to those requesting it, among others.

According to people close to the matter, the report, yet to be made public, found that it is possible that the promoters and directors of Byju's could have been more transparent with their actions. However, the MCA report observed that most of the corporate governance issues which were alleged by the directors were in relation to “transparency and independence”.

In addition to this, the report also highlights that Byju’s has been undertaking all steps necessary to resolve complaints and grievances pursuant to which many complaints stand resolved and the remaining are under the resolution process.

As of January 31, Byju's paid customer base had 7.5 million students. Of the 4,390 complaints made to the edtech company, 2,856 have been resolved and the pending complaints formed 0.02 per cent of the total paid customer base.

There is also "no issue with the change in the accounting policy for revenue recognition," the report found.

The company used Rs 9,025 crore from 2014 to 2022 for M&A and these acquisitions returned an income of Rs 4,287 crore.

Currently, Byju's is involved in multiple cases in courts as well as in the National Company Law Tribunal (NCLT). The edtech company is trying to raise $200 million in a rights issue but has been restrained from utilising any funds by the NCLT. 

Byju's is also exploring out-of-court settlements with some of its creditors. Once valued at $22 billion, the edtech company is now worth zero. Global investment giant Prosus wrote off the value of its shareholding in Byju's, recording a loss of $493 million in its annual report for FY24.

With agency inputs.