Also in this letter:
■ The two key changes Deloitte sought from Byju’s
■ Ether trading surges on Indian crypto exchanges ahead of The Merge
■ Jungle Ventures to triple India investment team in six months
Byju’s, India’s highest-valued startup, said its revenue from operations for the financial year that ended March 2021 (FY21) has been readjusted to Rs 2,280 crore even as it incurred a massive loss of Rs 4,588 crore, around 18 times the Rs 262 crore loss it reported in the previous fiscal.
This marks a significant drop of around 50% from the projected revenue of about Rs 4,400 crore cited in the unaudited results of Byju’s parent firm Think & Learn Pvt Ltd, which has been facing intense scrutiny over its accounting practices in recent months.
Catch up quick: We first reported about the difference between Byju’s unaudited revenue and the official accounts now signed off by the startup’s audit firm Deloitte Haskins & Sells on September 12.
Over the past week, Byju Raveendran, founder & CEO of Byju’s, had been briefing the company’s shareholders about the discrepancies attributing it to business model changes due to the pandemic, multiple sources told us.
Driving the news: Raveendran told us on Wednesday the company had recorded “significant growth in revenue compared to financial year 2020 but because of revenue recognition changes, it’s getting pushed to next financial year”.
“There is no revenue loss which is being called out in the audit report, on account of [which] there will be more growth in FY22,” he added.
Cost of acquisitions: Pointing out that while “the revenue got pushed out the subsequent costs associated with the revenues did not get (pushed out), also we closed most of the acquisitions in 2021, which added to the losses,” he told us.
The educator-turned-entrepreneur said the past few months have been “challenging”, with the company facing questions for delaying the filing of its audited accounts.
Business model changes: Raveendran said the changes effected in its financials for FY 21 were based on what the auditor deemed to be right. Also, some of the revenue recognition fixes are based on business model changes, he added. “When there are significant recognition changes, auditors have to do more work. The initial delay was due to Covid-19 and the second part was just the time needed to rework the recognition.”
Byju’s readjusted its unaudited revenues for FY21 after its audit firm Deloitte Haskins & Sells sought two key changes.
What are they? Firstly, the nature of revenue recognition was changed. If the company sold a three-year course, for example, it had been accounting for the whole payment as revenue in the same fiscal year. The auditor said it should be deferred over the period.
“Revenues from streaming services (online courses), which was previously recognised fully on commencement of contract, has been adjusted to be recognised rateably over the period of the contract,” read a notes accompanying the annual earnings report of Think & Learn Pvt Ltd, Byju’s parent firm.
“That’s what we have to do – that’s the standard,” a top edtech founder told us.
We had reported September 12 that this was one of the changes Byju’s was making so that the auditor would sign off on the results, which were released Wednesday after an 18-month delay. Byju’s reported audited revenue of Rs 2,280 crore for FY21 against Rs 4,400 crore in its unaudited earnings.
The other change related to interest paid by Byju’s to partners that provide loans to customers to buy courses. This interest has been moved out of finance costs and accounted for under revenue, since the loans are in the nature of payments to customers.
GST scrutiny: In FY21, Byju’s had come under the scanner of the Directorate General of Goods and Services Tax Intelligence over alleged evasion. The matter was settled after the company agreed to pay what it was liable for.
“The Directorate General of GST Intelligence finalised the investigation on February 18, 2021, against books supplied during the period July 2017 to October 2020,” according to the audited earnings report.
Indian cryptocurrency exchanges are seeing a jump in trading volumes of Ether, the world’s second-most valuable crypto asset, ahead of Ethereum’s transition to a less energy-intensive technology to run its blockchain. Ethereum refers to the blockchain-based software platform, while its crypto asset is called Ether.
The Merge: Called “The Merge”, the transition is expected to take place some time on September 15 and is being touted as one of the most important events for the crypto industry in recent years.
The switch is expected to reduce Ethereum’s energy consumption by 99.95%.
The surge: Indian crypto trading platforms are seeing a surge in Ether trading ahead of the Merge, senior industry executives told us.
Trading activity on Ether “has been seeing increased traction with volumes up 70-80% (last seven-day volume, as compared to our average weekly volume on that pair) than our usual volume on Eth pairs,” said Minal Thukral, executive vice president, growth and strategy at crypto exchange CoinDCX.
CoinSwitch Kuber saw a 61% increase in traffic for Ether on its app from September 5 to 13, a spokesperson for Andressen Horowitz-backed crypto platform said. The number of Ether trades on the app had also gone up by 36% during this period, the spokesperson added.
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Amit Anand
Singapore-based Jungle Ventures will triple its investment team in India in the next six months, founding partner Amit Anand told us in an interview.
The company, which closed its fourth $600 million fund in May, has a team of four professionals in New Delhi and Bengaluru. The company foresees an increase in the pace of investments in 2023.
Quote: “There are a lot of founders who have raised a lot of capital in 2021. They are now investing in either expanding their product lines or getting into new geography,” said Anand, whose fund backs early- to growth-stage startups. “They’re all kind of waiting and seeing how the markets play out. From a fundraising perspective, I expect to have a lot more intensity and velocity of deal-making in 2023,” he said.
Anand said the slowdown in investment has mostly come from “asset manager”-type investors who watch the stock markets and movement of assets.
“This year has been one of those years where the company builders (investors) have just not stopped. They have been investing in great founders and teams building new businesses, but the asset allocators, obviously, had to step back and think about what the new world is going to look like,” he said.
TWEET OF THE DAY
IT services providers are facing pricing pressure from large technology clients as inflationary pressures rise across the United States and Europe, experts told us.
Big Tech firms including Microsoft, Google and Meta are slowing down on hiring plans, while clients are holding back on smaller contracts to IT service providers, they added.
Most Big Tech firms indicated during their recent quarterly results that they were implementing strong cost management measures.
According to a PwC survey – Pulse: Managing business risks in 2022 – released in August, 50% of respondents in the US said they were reducing overall headcount even as business leaders remained concerned about hiring and retaining talent.
More pain coming: As inflation bites and the economy tightens, major IT services firms will face further pricing pressure, said Phil Fersht, chief executive of HfS Research. “With so many IT services firms – both high-end and mid-cap – all vying for the same business there will be some forced reduction in pricing,” he said.
The government is still ‘evaluating’ applications seeking capital incentives to set up semiconductor fabrication units, it has told ISMC Analog, a consortium of Israeli technology company Tower Semiconductor and Gulf-based Next Orbit Ventures.
It was referring to the $10 billion semiconductor incentive plan announced in December 2021.
The government has also asked ISMC to “submit additional information” on the project plan, sources aware of the development told us.
Letter to govt: The response, from the Ministry of Electronics and IT, came after the consortium wrote to the government urging it to expedite the incentive approvals necessary to start building a factory by the end of this year.
We reported last month that ISMC had sought assurance from the ministry that it would ‘honour its words’ on providing approval to the incentives.
The response from the IT ministry, however, stopped short of offering a timeline for approvals.
ISMC Analog is among the three applicants that have proposed to set up semiconductor fab units in the country. The consortium has proposed a $3 billion analogue fab along with Tower Semiconductor, which was acquired by American multinational Intel in February.
M2P bets big on lending, launches core lending stack: Following an acquisition spree beginning earlier this year, financial infrastructure provider M2P has launched its core lending stack as it bets big on providing lending application programming interface (API) infrastructure to banks and fintechs. M2P will be now consolidating all its existing lending offerings, including card issuances and buy-now-pay-later (BNPL) infrastructure, under the new stack.
IBM takes a hard stand on moonlighting: The practice of moonlighting, or employees taking up other projects while working for a company, is unethical, said Sandip Patel, managing director of IBM India. He was echoing the thoughts of Wipro chairman Rishad Premji on the issue. “You know Rishad’s position on this. I share Rishad’s position,” Patel said at the IBM Think conference in Mumbai on Wednesday.
Global Picks We Are Reading
■ VR developers accuse Facebook of withholding the keys to metaverse success (The Washington Post)
■ Tencent gets China’s approval for Its first game in more than a year (WSJ)
■ “Our main demand is not to get killed”: Mexican women find safety in location-tracking Facebook groups (Rest of World)
