The Ministry of Corporate Affairs investigated BYJU’S to check if they followed the rules for running companies. After a year of investigation, they found that BYJU’S didn’t fully follow some of these rules. However, they found no evidence of fraudulent activities, like stealing money or manipulating their financial records. The government probe clears BYJU’S of financial fraud.
They found problems with the company’s management and with meeting the requirements set for businesses. These issues, along with changes in how the company was getting money, were the main reasons why BYJU’S had big losses.
Corporate Governance Issues at BYJU’S
The Indian government investigated BYJU’S because they didn’t submit their financial reports for the year ending March 2022. Here’s what they found:
- Disclosure Failures: BYJU’S didn’t fully inform all their directors about important company purchases. They also rushed meetings to approve these deals without enough notice.
- Responsibility Questions: The investigation didn’t clarify if Byju Raveendran, the company’s leader, is personally responsible for these problems or if he’s fit to continue running the company.
- Impact on BYJU’S: Despite these issues, the investigation didn’t find evidence of serious financial crimes like fraud or hiding money. This might ease some of the challenges BYJU’S is facing, such as a lot of debt, possible layoffs, late payments to employees, a shortage of cash, and legal problems with its investors and suppliers.
Factors Contributing to BYJU’S Losses and Governance Issues
The investigation into BYJU’S revealed two main reasons for its increasing financial losses:
- Weak Governance and Compliance: BYJU’S didn’t have strong practices in managing and following rules for running the company. This, along with changes in how it got money, made its losses grow.
- Lack of Financial Oversight: The company didn’t hire experts to oversee its finances and ensure compliance with all the rules, which contributed to its financial problems.
The investigation also found that BYJU’S didn’t tell all its directors everything about the companies it bought. It sometimes called meetings to approve these purchases without giving directors enough time to prepare. However, the company’s founders said some of these directors were also investors in other companies that compete with BYJU’S.
Governance and Legal Issues
The report doesn’t clearly say if Byju Raveendran is responsible for the company’s governance problems or if he should continue leading it. Some unhappy investors want him removed because they think he and the company didn’t properly manage things or follow the rules.
The report also does little to solve the company’s bigger problems. BYJU’S expanded fast but hasn’t made a profit, which caused it to run short of cash and its value to drop. Now, it’s dealing with lawsuits in India and the US, adding to its challenges.
BYJU’S Peak Valuation to Financial Struggles
BYJU’S, once highly valued at $22 billion, saw a surge in business during the COVID-19 pandemic. However, their cash reserves declined as COVID-19 cases decreased and schools reopened. Now, they are facing multiple bankruptcy cases in India and abroad. Despite raising over $100 million from existing investors through new shares, an Indian court has blocked them from using this money.
Founder Byju Raveendran, a former teacher, is trying to rebuild the company’s main business while focusing on the future of education with advanced artificial intelligence for personalized learning. He’s also dealing with personal financial pressures, including taking on personal debt.
Recently, BYJU’S faced a sharp valuation cut by a US asset management company, dropping from $22 billion to just $120 million by March 2024. The company reported a significant increase in net losses and a substantial rise in operating revenue in the financial year 2022.
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