Stormy Seas Continue For BYJU’S As Govt Considers SFIO Action

There could be more trouble on the horizon for the beleaguered edtech giant BYJU’S, this time from the central government.

The Ministry of Corporate Affairs is reportedly looking at the possibility of involving the Serious Fraud Investigation Office (SFIO) to investigate the circumstances around the resignation of Deloitte Haskins & Sells LLP and BYJU’S delayed financial reporting.

One of the people familiar with the development told Mint that the ministry has already looked at the legalities and the procedures to refer to the SFIO recently. 

Late in June, it was also reported that BYJU’S was under the MCA scanner for corporate governance lapses.

While the Registrar of Companies (RoC) is empowered to check the book of accounts of any registered entity, the SFIO is being considered due to its perks. Being a multidisciplinary agency, the SFIO includes experts across accountancy, forensic auditing, banking, law, capital markets, taxation and IT.

The consideration from the MCA comes as BYJU’S former auditor, Deloitte, cited its inability to start an audit for the edtech’s FY22 financial statements due to delays in accessing the said documents and the underlying books of accounts. The auditor, one of the big four auditing firms, added in its resignation that these financials should have been tabled by September 30, 2022.

To be sure, BYJU’S CEO Byju Raveendran and CFO Ajay Goel recently assured the edtech’s investors at an EGM that new auditors BDO have started on the audit and will table the FY22 financials by September 2023, with FY23 financials set to be presented by December.

Incidentally, when a statutory auditor is resigning, it is required to inform the authorities about the circumstances of their resignation. 

When Deloitte tendered its resignation, it thanked the management for its cooperation. The auditor also did not mention any instances of ‘financial irregularities’, an important factor for the government’s regulatory response to the alleged compliance defaults in the edtech giant.

The government can now order an SFIO investigation against BYJU’S under the Companies Act, 2013.

Per Section 212 of the Companies Act, the SFIO can commence an investigation after it either receives a request from the government (under Section 210 of the Companies Act), on intimation of a special resolution passed by a company, upon request of a Registrar (under Section 208) or in the public interest.

The speculation around a government-led investigation into its affairs comes when BYJU’S is already fighting on multiple fronts. From trouble with lenders of its $1.2 Bn Term Loan B to the resignation of Deloitte and three of its directors last month, along with widespread layoffs, the edtech giant has been making the headlines for all the wrong reasons over the past few months.