Audit hurdles for Byju’s Akash IPO?

Bengaluru Edtech major Byju’s may not be able to go ahead with its plans to list its subsidiary Aakash Education Services next year without submitting audited financial statements of previous years.

Experts operating in the corporate governance space opined that the market regulator Sebi may not give a green signal to any such plan when the group is facing scrutiny over non-submission of audited financial statements.

“According to listing regulations, any company going for fund raising from public will have to provide audited financial statements of previous years. In this case, Aakash Education Services has to provide audited statements. However, if the parent entity doesn’t have its financial statements in place, it will not be easy to get regulator’s nod for going public,” Shriram Subramanian, founder & MD of InGovernResearch Services, a proxy advisory firm told Bizz Buzz.

“The group company has to get its financial records in order and audited before it opts for its subsidiary’s listing plans,” he added.

Byju’s has earlier said that it would launch the Initial Public Offering (IPO) of its test preparatory arm Aakash Education Services Limited by middle of next year. “Byju’s will launch the IPO of its subsidiary, Aakash Education Services Ltd (AESL) mid next year. The appointment of the merchant bankers for the IPO will be announced soon to ensure a planned and successful listing next year,” the company has stated last month.

However, Byju’s is yet to submit audited financial statements of financial year 2021-22 (FY22) despite missing the deadline a long ago. Such inordinate delay was cited as the primary reason for Deloitte to leave the company as auditor last month. The board of Byju’s has also granted its official sanction for the IPO.

“The financial statements of the company for the year March 31, 2022, are long delayed, we have not received any communications on the resolution of the audit report modifications in the respect of the year ended March 31, 2022, status of the audit readiness of the financial statements and the underlying books and records for the year ended March 31, 2022, and we have not been able to commence the audit as on date,” said Deloitte as the rationale behind resigning as auditor.

Subsequently, Byju’s has appointed BDO as its new auditor, saying that this will help it “uphold the highest standards of financial scrutiny and accountability.”

Sources in the know said that the given the high profile nature of Byju’s case, market regulator will evaluate any listing plans of Aakash very closely, evaluating all aspects before allowing such proposals. The regulator is already facing flak from investors for its decision to allow listing of many startups in last two years, whose share prices have massively underperformed since listing.