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Monday, Dec 05, 2022

How Byju’s losses rose to Rs 4,500 crore in delayed FY21 results

Byju's losses rose 17-fold to over Rs 4,500 crore in the financial year ending March 2021, which was considered as a peak time for adoption of online education owing to the shuttering down of schools and educational institutions owing to the pandemic.

The financial declarations of Byju’s came after an apparent delay in signing off the results by auditor Deloitte, which had raised compliance related issues at the start-up.

Edtech major Byju’s clocked a revenue of Rs 2,428 crore in the financial year ended March 2021, far below its own projections. Its losses in the fiscal rose 17-fold to over Rs 4,500 crore as the start-up disclosed its financials for FY21, following an 18-month delay that also attracted government scrutiny.

Byju’s revenue of Rs 2,428 crore in FY21 was almost 14% below that in FY20 when it had posted a revenue of Rs 2,704 crore. It posted a loss of Rs 4,588 crore in 2020-21, compared to a loss of Rs 260-crore it had incurred in FY20.

It is worth noting that these are figures for the year ended March 2021, which was considered as a peak time for adoption of online education owing to the shuttering down of schools and educational institutions owing to the pandemic.

The financial declarations of Byju’s came after an apparent delay in signing off the results by auditor Deloitte, which had raised compliance related issues at the start-up. Deloitte had flagged certain concerns with the way Byju’s was recognising its revenue, which delayed the submission of results to the Ministry of Corporate Affairs (MCA).

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What is the change in revenue recognition at Byju’s?

According to Byju’s auditor Deloitte Haskins & Sell’s notes accompanying its annual financial statements, there are two key changes to how the firm was calculating its revenue:

  • Revenues from streaming services, which was previously recognised fully on commencement of contract, has been adjusted to be recognised rateably over the period of the contract.

Here’s an example to illustrate what exactly has changed here: Say a customer paid Byju’s Rs 5,000 for streaming content in a two-year course, the startup was earlier accounting the entirety of the Rs 5,000 in the same year’s revenue. However, under the changed system, that Rs 5,000 will have to be divided equally between the two years instead of being captured entirely in the first year’s financials.

  • Interest paid to loan partners on behalf of customers in respect of loans granted directly to customers have been reclassified from finance cost and adjusted against revenues, since these payments are in the nature of payments to customers.

Before FY21, when a customer borrowed to pay for Byju’s course, they would have to make a downpayment to the firm with the financier paying Byju’s the rest of the course amount after deducting the interest. What the startup was then doing is adding this to the finance cost and booking the entire revenue. However, under the new system, it has deducted this interest payment from its revenue.

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How has the new revenue recognition impacted Byju’s?

Rs 1,156 crore — that is the impact the new revenue recognition method has had on Byju’s top line in FY21. This amount has not been recognised in calculations “because on the point of these transfers (Byju’s) did not meet the criteria that it was probable it will collect the consideration to which it is entitled,” according to its auditor’s note.

“Revenues from these transfer of products will be recognised when substantially all of the consideration is received by (Byju’s) or when the deferred payment terms expire because of default or any non-performance by the customer and to extent any consideration received is non-refundable,” the note said.

In a statement Wednesday, Byju’s said there was “significant business growth” in FY21 over FY20, “but since this is the first year where new revenue recognition started because of a Covid related business model change, almost 40% of the revenue was deferred to subsequent years”. “The rationalised growth between FY21 and FY20 is a result of the changes made in the way Byju’s recognises its revenue, as advised by its auditors.”

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How have Byju’s acquisitions fared?

WhiteHat Jr, a startup which offers coding classes to school kids that Byju’s had acquired for $200 million in 2020, could contribute just Rs 326 crore to Byju’s total revenue in FY21. But at Rs 1,548 crore, its losses were five times that. In fact, WhiteHat Jr contributed around a third of Byju’s consolidated losses in the year ended March 2021.

Payment towards Byju’s $1 billion dollar acquisition of Aakash Educational Services Limited is yet to be complete, the financial statements revealed. As per the terms of the agreement for acquisition of Aakash, consideration to the extent of Rs 1,983 crore was due to be paid by Byju’s in June 2022. However, this has been deferred to September 23.

First published on: 15-09-2022 at 03:05:14 pm
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