Byju’s did not “indulge in financial fraud or siphoning of funds”

• Investigation raised questions about the company’s internal controls and decision-making processes.
• Byju’s failed to bring in experienced professionals to oversee its finances and compliance, leading to the deterioration of its financial position.

The recent government investigation into the corporate governance practices of Byju’s, India’s struggling online education startup, has shed light on the complex issues plaguing the company.

While the probe found no evidence of financial fraud or siphoning of funds, it did uncover significant governance shortcomings that have contributed to the startup’s mounting losses.

The year-long investigation by the Ministry of Corporate Affairs revealed that Byju’s failed to bring in experienced professionals to oversee its finances and compliance, leading to the deterioration of its financial position, Bloomberg reported. The report also highlighted the startup’s lack of transparency, as it was found to have not disclosed full details of its acquisitions to all directors and calling meetings to approve such deals at short notice.

The findings offer some support for Byju Raveendran, the once-celebrated founder who has been accused of mismanagement by disgruntled investors.

Sigh of relief

The report does not directly address Raveendran’s personal culpability for the governance lapses or his suitability to lead the company. However, it does acknowledge the rationale provided by the founders regarding the involvement of some directors who were also investors in rival companies.

The report’s conclusions come at a critical juncture for Byju’s, which is facing a cash crunch and a plunge in its valuation, as well as multiple lawsuits in India and the US.

The startup’s quick expansion during the COVID-19 pandemic, coupled with a change in the funding environment, has contributed to its financial woes.

While the government investigation has cleared Byju’s of financial fraud, it has raised questions about the company’s internal controls and decision-making processes.