BDO, the auditor of Indian edtech startup Byju’s, has resigned with immediate effect, marking the second time in about a year that the startup’s auditor has stepped down, raising further concerns about the company’s financial health and governance.
In a scathing resignation letter, BDO subsidiary MSKA highlighted a number of problems, including significant delays in Byju’s financial reporting, inadequate management support and concerns about the company’s ability to collect significant receivables from its Dubai-based entity.
The auditor general’s resignation comes as Byju’s, once India’s largest startup valued at $22 billion, faces a series of challenges, including a recent Supreme Court ruling reopening bankruptcy proceedings for the startup.
Deloitte, Byju’s previous auditor, and a key board member of the startup resigned last year, citing governance issues at the company.
MSKA, who was appointed for a five-year term in August 2023, said in his resignation letter that he “provided inadequate assistance to the company’s management in providing the books, information and explanations and sufficient appropriate audit evidence to enable them to complete the audit for the 2022-23 financial year.”
A Byju’s spokesperson said in a statement that BDO’s request to the company “crossed ethical and legal boundaries.”
“The real reason behind BDO’s resignation is that BYJU’s flatly refused to apply the report backdated, while BDO even recommended a company that could facilitate such illegal activities. There are recordings of several calls where BDO officers explicitly suggested that these documents be applied backdated, which BYJU’s refused to do. BYJU’s strongly believes that this is the main reason for his resignation,” the Byju’s spokesperson added.
MSKA disclosed that it had filed Form ADT 4 indicating a potential for fraudulent or illegal activity within the company.
The resignation letter also highlighted concerns about the various ongoing litigation against Byju’s and its board, including claims of creditors initiating liquidation proceedings, oppression of minority shareholders and allegations of mismanagement.
MSKA pointed out instances where Byju’s failed to share critical information with its audit team, such as notices of extraordinary general meetings and bankruptcy proceedings.
The auditor’s departure adds to the challenges facing Byju’s, which has seen its valuation plummet as it misses financial deadlines, falls short of earnings, and clashes with investors. Major backers including Prosus and Peak XV have previously alleged governance issues and taken legal action to remove founder Byju Raveendran.
The edtech company’s troubles have worsened in recent months, with the Indian Supreme Court recently staying a tribunal’s ruling that halted bankruptcy proceedings against the company. U.S. creditors are seeking $1 billion from Byju’s, adding to the pressure on the once-popular startup.
