Fixing Byju’s financial reporting key challenge for new CFO – The Financial Express

The Financial Express
With edtech major Byju’s under intense scrutiny and criticism for its questionable accounting practices, delayed financial reporting, and its efforts to repay a large $1.2-billion term loan B (LTB) raised in November 2021, the task is cut out for its newly appointed chief financial officer (CFO) Ajay Goel. In a late-night announcement on Monday, the company said Goel, former CFO of Vedanta Group, has been appointed its new CFO. Goel happens to be the edtech company’s first CFO.
With over two decades of experience in corporate finance, apart from Vedanta, Goel has served in leadership positions in various companies such as GE, Coca-Cola, and Nestle. He is well-versed in managing complex financial and regulatory environments, financial planning and analysis, risk management and taxation. According to financial analysts and edtech investors FE spoke with, Goel’s top priorities right now are to repair Byju’s capex management across numerous companies, limit cash burning, and improve financial reporting.
“Goel’s most important task could very well be fixing internal financial controls and maintaining a good system of self-audit. In addition, he could relieve CEO Byju Raveendran of his burden of communicating with existing investors so that Raveendran can focus on core business development itself… A tech founder is not always savvy with talking to investors in their language, but a seasoned CFO is trained to take care of this task,” said a venture capital investor who has investments in multiple edtech unicorns.
As part of the financial controls, Goel may also have to look into normalising employee-related expenses by downsizing inflated salaries that were given out during the peak of the funding bull run in CY2021, the investor added. Byju’s has also had a history of investors pulling out of committed funding rounds, which could have been due to weak financial reporting, experts pointed out, which could be addressed with the joining of Goel.
In March 2022, Byju’s had raised a massive $800-million round from Sumeru Ventures, Vitruvian Partners, and BlackRock, valuing it at $22 billion. However, the funding by Sumeru and also Oxshott Capital Partners amounting to $300 million did not conclude, and Byju Raveendran confirmed in an interview with FE that the $300-million in funds was withdrawn by the investors.
“Whether you are a regulated or an unregulated business, it is important that you file financials with the specific regulators within the defined timelines. That is essential for an outsider, especially for new incoming investors to understand how well a company is governed,” said a chartered accountant who has advised multiple consumer internet startups, including edtechs.
Byju’s had come under scrutiny from its financial auditor last year. The company also faced intense scrutiny from the ministry of corporate affairs (MCA) after its FY21 financials were delayed by almost 18 months beyond the prescribed timeline. It filed its FY21 results to the MCA on September 2022 after receiving an unqualified report from its auditor, Deloitte Haskins & Sells.
In its report, Deloitte compelled Byju’s to defer some 40% of revenues to subsequent years since its sold multi-year subscription. The deferral of revenue meant that revenue recognised from for few courses that Byju’s sells on a multi-year basis (up to 3 years), has got deferred across three years rather than booked in a single year. This revenue recognition policy was suggested by Deloitte since students are allowed to cancel the multi-year subscription and get their refunds anytime during the subscription plan.
“Goel will have to first fix Byju’s revenue definition. Although some of these practices stand corrected due to an audit from a third party, the CFO will now be primarily responsible for it apart from the cash flow management,” an analyst said.
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