(Bloomberg) -- Byju’s, the Indian education-technology firm that lost its auditor and three board members in one week, has begun damage control as regulators and investors amp up scrutiny of a startup that once symbolized the country’s internet boom.
Billionaire founder Byju Raveendran has in recent days reached out directly to investors to assure them the startup will finally release long-delayed financials and strengthen accounting processes. On a call with investors, Raveendran acknowledged his failure in installing processes that could have helped close the accounts on time and said its systems are being improved with the help of a newly appointed finance chief and general counsel, according to people familiar with the discussion.
The startup told investors it is on track to finalize fiscal 2022 numbers by the end of September after hiring MSKA & Associates to replace Deloitte Haskins & Sells, according to the people, who asked not to be named as the information isn’t public.
Byju’s is an emblem of the once-booming Indian startup arena, a firm that raised billions at the height of the country’s tech boom but that is now embroiled in a bitter dispute with creditors. The company has cut thousands of jobs to slash costs after the demand for online tutoring waned as Covid-19 restrictions were dropped and schools reopened.
The firm, valued at $22 billion in its latest funding round, has been facing troubles since it missed deadlines to file audited financial accounts. The company skipped payments on a $1.2 billion term loan and triggered a legal fight with creditors seeking quicker repayment.
India’s company regulator is also gathering information about Byju’s, according to people familiar with the matter. The Ministry of Corporate Affairs is expected to make a final decision soon about whether to open a formal probe, the people said.
“The company has not received any communication from the MCA in connection with the resignation of the auditor and related matters,” according to Zulfiquar Memon, managing partner at MZM Legal, which Byju’s said is its legal representative. The ministry didn’t respond to requests for comment.
Raveendran and Ajay Goel, appointed CFO in April, hosted a call late Saturday to assure investors that they are taking action to strengthen processes and correct missteps, the people said. The company’s systems are being improved with the help of Goel and General Counsel Roshan Thomas, Raveendran said, according to the people.
Negotiations with creditors battling the company in US courts are progressing, and Byju’s expects a resolution soon, Thomas told investors, the people said. A representative for Byju’s declined to comment.
Goel spoke on his first shareholder call since joining the firm and told investors it has committed adequate resources to complete its financial statements. Audited accounts for the financial year to March 31, 2022, will be finalized by Sept. 30 and for the subsequent year by December, Goel said, according to the people. Reuters earlier reported Byju’s had held the call.
The $1.2 billion loan is being quoted at 63.8 cents on the dollar, Bloomberg-compiled data show. A level below 70 is generally considered distressed.
Byju’s has been working on reconstituting the board for at least three weeks, Raveendran told investors, according to the people. Once the firm accepts the resignations of directors GV Ravishankar, managing director at Peak XV Partners, Russell Dreisenstock, a Prosus NV executive, and Vivian Wu, a managing partner of ventures for the Chan Zuckerberg Initiative, its board member information will be updated with the government databases, the founder said on the call.
The three resigning board members also spoke on the call. They assured investors that they will work with the company to reconstitute the board, the people said.
--With assistance from Ronojoy Mazumdar.
(Updates with details about potential government probe)
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