Byju’s’ corp governance had lapses, but it did not commit financial fraud, finds probe

A year-long probe by the Ministry of Corporate Affairs has reportedly found lapses in the corporate governance of beleaguered edtech firm Byju’s, but has cleared it of financial fraud. The probe has not found any evidence of wrongdoing such as siphoning of funds or manipulation of financial accounts by the firm helmed by Byju Raveendran.

According to a report in Bloomberg, the ministry nevertheless found governance shortcomings that contributed to Byju’s mounting losses. The investigators’ report is yet to be made public. 

Raveendran would find some solace in the findings as he has been accused of mismanagement by investors. Three big investors including Prosus and Peak XV Partners (formerly Sequoia Capital India) left the Byju’s board over differences with Raveendran on business process and internal controls. 

The report is yet to directly address whether Raveendran personally is at fault for the governance lapses or whether he is still qualified to run the company. Investors have sought Raveendran’s removal citing management and compliance failures.

The investigation found that weak corporate governance and compliance practices, as well as a change in funding environment, contributed to Byju’s expanding losses. They highlighted the firm’s failures to bring in professionals to oversee the finances and compliance. 

According to the report, Byju’s did not fully disclose the details of its acquisitions with all the directors and meetings to discuss such deals were called at a short notice. As per the report, the ministry also acknowledged the rationale that some of the investors were also investors at rival companies. 

At its peak Byju’s was valued at $22 billion. Prosus recently wrote off its 9.6 per cent stake to zero. In its annual report, Prosus stated, “We have impaired Byju’s to zero at the end of FY24 due to inadequate information on the company’s financial health, liabilities, and future outlook.”