Byju's May Face Probe From Ministry Of Corporate Affairs After ED Red Flags

Byju's parent Think & Learn Pvt., may now face scrutiny from the Ministry of Corporate Affairs after delaying results beyond the deadline, about two months after the Enforcement Directorate conducted searches over an alleged violation of foreign exchange rules.

BQ Prime has learned from officials that the ministry, also a regulator for unlisted firms, regularly takes action against companies that fail to comply with rules like filing audited financials and holding an annual general meeting by Sept. 30 of the next fiscal.

Failure to meet the regulatory requirement can lead to a penalty in the form of compounding, a process in which companies voluntarily admit to a lack of compliance and seek redress. Byju's has still not filed its audited earnings for the years 2021 and 2022.

An MCA probe is being initiated over corporate governance lapses at the company, CNBC-TV18 reported, citing unnamed people. Byju's and the MCA didn't respond to BQ Prime's queries.

Byju's troubles have been mounting, with auditor Deloitte Haskins & Sell resigning with "immediate effect". The startup, once valued at $22 billion, has seen valuation cuts by prominent investors, sacked employees, and is now embroiled in a legal battle with lenders over repayment terms after defaulting on debt.

In April, the ED conducted searches and seizures at three premises belonging to Founder and Chief Executive Officer Raveendaran Byju and his company in Bengaluru.

"The company has not prepared its financial statements since financial year 2020-21 and has not got the accounts audited, which is mandatory," the agency had said in an April statement. "Hence, the genuineness of the figures provided by the company are being cross examined from the banks."

The ED alleged that searches under the Foreign Exchange Management Act unearthed that the company received about Rs 28,000 crore as foreign direct investment between 2011 and 2023. The company remitted around Rs 9,754 crore to various foreign jurisdictions during the period in the name of overseas direct investment.

Around Rs 944 crore was booked for "advertisement and marketing expenses", including the amount remitted to foreign jurisdictions.