Karti Chidambaram calls for an investigation into Byju’s business. What’s cooking?

Byju's was once a go-to place for children seeking tuition, professionals taking skill-enhancing courses, and fresh graduates looking for a lucrative career.  But it seems like the successful mirage is disappearing with time. And Congress MP Karti Chidambaram has also taken a note of it. 

On July 21, 2022, the lawmaker tweeted that he's written to the Special Fraud Investigation Office (SFIO) asking them to investigate edtech company Byju's finances. 

I have written to the #SFIO to look into the financing of @BYJUS it’s imperative that a thorough investigation is launched. @MCA21India @sequoia pic.twitter.com/DfBUNhNxNU

— Karti P Chidambaram (@KartiPC) July 21, 2022

There were three issues highlighted by Chidambaram in his letter:

1. The $800 million (Rs 6,401 crore) funding it got through Sumeru Ventures, Vitruvian Partners and BlackRock. 
2. Another funding made by Oxhott Capital Partner for Rs 1,200 crore. But Byju's revealed that they have not yet received this funding. 
3. Byju's has not yet filed its FY 2020-21 financial statements.

Why are these issues concerning? In the first case of the Rs 6,401 crore funding that Byju's announced on March 17, 2022, Chidambaram, citing news reports, said that the funding doesn't seem to be in place properly. An earlier report had alleged that Byju's had "lied" about this funding and purportedly involved a Godman. 

• The Rs 6,401 crore funding includes a Rs 3,200 crore investment made personally by the founder Byju Raveendran. A filing by the Byju's with the Ministry of Corporate Affairs showed Vitruvian Partners were allotted shares worth Rs 571 crore. There is no similar filing for the other two named entities - Sumeru Ventures and BlackRock. 

• Chidambaram also said that Sumeru Ventures laid inactive for 3 years since it was established in 2018, before suddenly making three "sizeable investments" in Byju's, all within a few months of February-April 2022. 
• Moreover, with regards to the Oxshott Capital Partner, the firm seems to have made only one investment so far, in Byju's. And even then, Byju's has said that the Rs 1,200 crore investment has not yet been received "nine months on". 
• Byju's has come under scrutiny for not having filed its FY 2020-21 financial reports, with some reports alleging that its auditor Deloitte Haskins & Sells has not signed off on its reports due to differences. 

What do these allegations mean? In simpler terms, the accusations seem to point toward the involvement of shell companies and the issue of money laundering through these companies. The lack of financial filings has only given rise to speculations that something is cooking in the books of Byju's. 

On the other hand, Byju's is planning a massive acquisition and expansion. It is looking to buy the American edtech company 2U for a price of $2 billion, much above its market valuation. There are questions being raised about how Byju's will be financing the deal if at all. 

Other concerns: There were reports that Byju's has not paid the shareholders of Aakash Educational Services after its acquisition, but the company has since said that the payment has been done. 

Byju's also saw mass layoffs, with some reports claiming that some 2,500 people across the group were laid off. But Byju's said that it had only laid off 500 employees. 

Byju's and other edtech startups had come under scrutiny for their aggressive selling practices too.