Daybreak - Byju's new CFO quits in 6 months. Here's what you should know

Episode Date: October 25, 2023

Two days ago, on Tuesday, India’s most famous edtech was in the news again. Byju’s Chief Financial Officer (CFO) Ajay Goyal quit the edtech barely  6 months after joining. It had taken Byju’s 16 months to find Goyal after its previous CFO PV Rao quit in December 2021 .Goyal was hired only in April this year and had a tough task cut out for him: to help improve the company’s financial compliance is what Byju’s has been in a lot of trouble for. Goyal was to finalize the FY22 accounts and and issue the audited accounts as soon as possible. A little more than a week ago, we also heard news that Byju’s was expected to file the long-awaited financial results for FY22 later that week. But more than 10 days later there is no sign of the financials. Instead the edtech’s CFO who was incharge of getting those financials out has quit. Thankfully though, in its statement, Byju's said that Goyal will complete work on Byju’s audited FY 22 financial statement before leaving, which means, that the FYY 22 financials will be out sooner than later. So in today's episode we take you back to the edtech's botched up FY 2021 financials so you know what to look out for in the next one.Tune in.Free ReadKota’s Rs 6,000 cr coaching business may never be the same againRecommended listeningWTFinancials is going on at Byju's?Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcast, you've probably heard me. My interruptions, my analogies and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor have been working on an ambitious new podcast. It's called Intermission.

We want to tell the Sita Ramancahans, my colleague. secret-source stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of

multi-camera shoots in professional studios, laborious editing and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Two days ago, on Tuesday, India's most famous troubled ed tech giant was in the news again. And like always, it wasn't good.

Bayju's chief financial officer, Ajay Goel, quit the attack barely just after six months of joining. It had taken Bayju's 16 months to find Goel after its previous CFO, P.V. Rao quit in December 2021. Goel was hired only in April this year and the task cut out for him was pretty intense. He was to help improve the company's financial compliance, which, as most of us know, is exactly what Bayju's has been in a lot of trouble for. So he was to finalize the FY 2020 or financial year 2022 accounts and issue the audited accounts as soon as possible. If you're wondering why FY 2022 financials in 2023, well, Bayju's has struggled to release its audited accounts on time for three years in a row now. It filed its FY 2021 financials after a delay of one and a half years in September last year. Goel anyway had a tough job ahead of him, but his tenure at Bayju's began on quite a rough note.

Just a month after he joined, the enforcement directorate raided Bayju's offices. And then, just a month after that in June, its long-standing auditor Deloitte washed its hands off the company. Then, a little more than a week ago, we heard news that Bayju's is expected to file the long-awaited financial results for FY 2022, later that week. But more than 10 days have passed and there is still no sign of the financials. Instead, the EdTech CFO who was in charge of getting those financials out has quit. Thankfully though, in its statement, Bayju said that Goel will complete work on Bayju's audited financials for 2022 before leaving, which means that the FY 2020 financials will be out sooner than later. So I thought today is a good day to take you back to Bayju's infamous FY 2021 financials.

Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nekda Sharma, and I don't usually chase a new cycle. Thrice a week on Monday, Wednesday and Friday, I come to you with one business story that is worth understanding and worth your time. But today is a Thursday and I have a bonus story for you considering how important it is. So let's dive in. It was in 2018 when Bayju's became a unicorn company. A great year for Bayju's, no doubt.

But it was actually three years later, 2021, that was the landmark year for the ad deck. It saw a five times scale up in terms of size. This was, of course, after the pandemic hit us and pushed online learning to new heights. Baidju's raised $2.5 billion since the beginning of the pandemic. Its valuation rose from $8 billion to $22 billion. In the short period between 2020 and 2021, Bayju's users almost doubled from over $60 million to over $100 million. So 2021 was the year when Bayju's garnered mind-boggling valuations and made a dizzying number of acquisitions. It spent $2.5 billion to acquire 13 firms like White Hat Jr.,

Akash coaching, Topper, epic and great learning. Basically, 2021 should have been a great year for Bayju's. So when its auditor Deloitte took months to give Bayjuze an approval for its FY 2021 filings, many thought it could be because of a lack of audit bandwidth. After all, the company had seen a five-time scale and size. And that is exactly what a company spokesperson also said to the Ken last June when we asked them about the delay in the filing. Unfortunately for Bayju's, that five times scale and size also indicated the size of its losses.

It was 15 times. The auditor gave an adverse opinion on Bayju's financial statements for 2021. And what did that mean? Stay tuned to find out, but before that, my colleague Akshya has a quick message for you. We all know how difficult it is to crack competitive entrance exams in India, right? close to 3 million students sat for these exams last year and less than 10% of them managed to get through. But chances are those who did probably prep for these exams

in the city of Kota in Rajasthan, the undisputed coaching capital of the country, infamous for its hyper-competitive make-or-break environment. I'm sure you've seen shows like Kota Factory on Netflix. The schedules the aspirants are put through are so grueling that some of them are even pushed to take their own lives. This happens year in and year out, but it's always business as usual in Kota, unfortunately. Not anymore though, as my colleague Elifia discovered on her recent visit to the city. In 2023, there have been 26

students suicides in Kota the highest on record. Naturally, parents are anxious, admissions have gone down by 20% since June, under construction hostels are turning into flats, and coaching institutes are dreading what comes next. But the student suicides are not the only reason behind Cota's worst crisis to date. If you want to know why the Cota factory is falling apart, you will find no better story than Ali Fiers to make sense of that. This story has been made available for free for exactly 24 hours on the Ken's website. Just for today the 26th of October, link is in the show notes.

So go ahead, give it a read and share away with your friends before the counter runs out. I am Akshire from the Ken's Newsroom. Thank you for listening to us. If you like what we do, please rate and review us wherever you get your podcasts. And now over to your host, Snigda. So as it turned out, the Deloitte auditors were not satisfied with what by Jews was presenting to them as a fair picture of their accounts. This basically meant that they had sufficient evidence to conclude that Bayju's financial statements contained material misstatements

and did not represent its financial position fairly. The same month in June 2021, the Ken was the first one to report that Deloitte had held off from approving Bayju's financial statements over its revenue recognition practices. One of the most notable changes in Baidu's financials for that year was to do with how it was booking its revenue. EduTech products, mainly tablets and memory cards, accounted for more than 80% of Baidu's revenue during this period. And as in the previous year, it recorded the entire sale value of these products when the customer bought them. But it took a different approach for the revenue that it got from the streaming of educational content. Whatever a learner was charged for the content, it would now be booked through the period that

they availed for it. For example, if the learner paid, say, $10,000 for Bajou's content over two years, it would be divided equally between these two years instead of being captured entirely in the first year's financials. Apart from this, Deloitte also pointed out problems related to how financial guarantees were being given on behalf of customers. It has to, highlighted improper estimation of sales returns and expected credit loss, and also the absence of an accounting manual. Plus, there was White Hat Jr., the four-year-old coding for kids' startup that Bayju's had acquired in 2020 for $300 million. The acquisition gradually became quite a burden for Bayju's. From the time that it was acquired, White Hat Jr. had pulled in over 300 crore rupees

in revenue. But its losses were five times that. It contributed to around a third of Bayju's consolidated losses in the year that ended in March 2021. One reason is likely its high customer acquisition costs. The Ken had reported earlier that White Hat Jr. was spending as much as $2,000 to acquire a customer in the U.S., which is its second largest market. The auditors had even pointed out that the company had a lack of personnel with adequate experience and required competence in financial reporting and internal control. Apart from the standard audit fees, Bayju's had to pay three and a half crore rupees to Deloitte. And this was on account of, and I'm quoting, the additional effort incurred in the audit consequent to material weaknesses

observed in internal controls. End quote. Well, That's that, I've told you all about Bayju's botched up-turb financials for FY 2021, so you're up to date when the next one is out, which is going to be soon. But before I sign off, I have something to say to you, dear listener. First of all, thank you for tuning in. Yesterday, I told you how it has been more than 10 months since we launched daybreak, and I still feel like I don't know you. If you listen to daybreak regularly, please write to me at snigda at the can.com.

It's S&I GDHA at the rate the-hyphen k-ken.com. I want to know who you are, what you do, and I don't mean that in a creepy way at all. Everything you share will be, of course, confidential. The point is, I want to know what you like about daybreak and most importantly, how you think we can be better now that we are coming close to Daybreak's first birthday. Thank you for tuning in and also thank you to those who wrote to me yesterday. It was so lovely to hear from you. I hope I get to hear from more of you very soon.

Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. I am Snigda Shire. my host and today's episode was edited by my colleague Rajiv Sien.