Private-equity and venture-capital investors in Byju’s, India’s most valuable startup, caught a break this week—the company isn’t listed yet. If it had been, gyrating markets seem very likely to have caused some serious vertigo.
The Indian education-technology company finally released audited financial statements for the financial year ended in March 2021 on Wednesday, after an 18-month delay. Losses ballooned but revenue was nearly flat at the equivalent of $304.6 million—an unpleasant surprise since Indian edtech companies logged massive user growth when schools shut down during the pandemic.
Byju’s valuation had skyrocketed to $22.6 billion as of July, according to data intelligence portal Tracxn. It became a so-called unicorn with a $1 billion valuation in 2018.
The company, which is backed by the Chan Zuckerberg Initiative and Sequoia Capital, pinned the uninspiring numbers on changes sought by its auditor Deloitte. Previously, Byju’s had recognized the full revenue value of its online courses upfront at the commencement of the contract. Deloitte pushed back, meaning revenue is now booked as recurring payments throughout the period of the contract instead. The auditor also requested other changes.
All of this resulted in almost 40% of revenue initially booked for 2021 being deferred to subsequent years. At the same time, the company also acquired several loss-making companies, resulting in the large net loss.
To be sure, it isn’t a good look for a company that was reportedly looking to list in New York via a special-purpose acquisition company earlier this year. And it is bound to raise additional questions on the lofty valuations demanded by many Indian startups in recent years, particularly since so many have performed poorly after their initial public offerings.
The real proof one way or another would be in the pudding baked this fiscal year: the company’s audited 2022 fiscal year results are due on Sept. 30. Byju Raveendran, the company’s founder and chief executive, has brushed aside this year’s poor performance as an accounting technicality and claims his 71 investors aren’t worried: Many of them are sitting on paper gains of 50 to one-hundred fold.
“It would be easy for investors to sell at some discount and still make huge money if they think there is a real issue,” said Mr. Raveendran. The company expects fiscal 2022 revenue to rise significantly.
However Byju’s saga ultimately unfolds, it seems probable that such accounting clarifications will become symbolic of the go-go days of the easy-money era in India—when investors bought first and asked questions later, sometimes to their chagrin.
Write to Megha Mandavia at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
.