The Serious Frauds Investigation Office (SFIO) has commenced investigation into EdTech major Byju’s alleged financial reporting compliance failures and governance lapses that recently led to its auditor’s resignation as well as three of its key Board members calling it quits last month.

Also read: Byju’s to form a Board Advisory Committee to guide CEO on governance

SFIO is a multi-disciplinary organisation under Ministry of Corporate Affairs (MCA) consisting of experts in the field of accountancy, forensic auditing, law, information technology, investigation, company law, capital market, and taxation for detecting and prosecuting or recommending for prosecution white-collar crimes/frauds. 

Double whammy

SFIO has commenced work in Byju’s case, informed sources said. This comes on top of CA Institute’s Financial Reporting Review Board (FRRB) — which is not an investigation agency — already undertaking a review of Byju’s financial statements for two financial years: 2019-20 and 2020-21.

The SFIO investigation comes at a time when Byju’s — the most valued startup in the country — has decided to set up a Board Advisory Committee (BAC) to mitigate the backlash on corporate governance issues. Byju’s is also looking to take one of its subsidiaries, Aakash Educational Services, to the public markets through an IPO for a listing. 

The BAC is expected to advise the founder & CEO, Byju Raveendran, on Board composition and governance structure best suited for Byju’s size and scale.

Also read: Byju’s promoters have sold shares worth $408.53-m in secondary deals since FY16

The BAC will serve as a working group consisting of independent directors with credible backgrounds and relevant experience from diverse corporate fields, Raveendran told shareholders at an emergency Extraordinary General Meeting on Wednesday.

Although not a listed entity, the governance and compliance lapses at Byju’s is seen to have an impact on India’s start-up story and hence the interest of investigating agencies in ascertaining on what went wrong, sources said.

Last month, three directors — GV Ravishankar of Peak XV Partners (Sequoia Capital India), Russel Dreisenstock of Prosus and Vivian Wu of Chan Zuckerberg Initiative — stepped down from the Byju’s Board over differences with founder Raveendran. 

These three directors were representing some of the largest shareholders of Byju’s. On the same day, Deloitte, Haskins & Sells, statutory auditor of Byju’s, resigned, noting that it had not been able to commence audit of financial statements for 2021-22 as the company had not communicated the status of audit readiness of the financial statements and the underlying books and records for the year ended March 31, 2022. Byju’s immediately appointed BDO as statutory auditor. 

Meanwhile, Byju’s said that it has not received any communication from the SFIO to date on the launch of any investigation.