Separately, the Mumbai-based company is undergoing an audit by accounting firm PwC. Sources said the audit is in the final stages and is believed to have found discrepancies in the company’s revenue recognition process, among other issues.
An email query sent to PwC remained unanswered.
Medikabazaar’s board is also finalising a new CEO.
A spokesperson for Medikabazaar said the company has on-boarded a senior professional management team to support the business. It also said that the board was made aware of certain irregularities concerning the business and operations of the company, and with the support of its investors, it carried out an external review.
“In addition, the board has also initiated plans to bring a new CEO into the business with experience of managing large scale businesses,” the spokesperson said. “The review found certain weaknesses and deficiencies in internal control and processes. Following the review, the company has further strengthened its internal control mechanisms and also reinforced the executive team with senior additions. The board continues to work with the management to bring any additional changes to processes and systems that may be warranted in a high-growth business such as Medikabazaar.”
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In 2023, several B2B startups faced investor and board-led audits as well as CEO transitions to scale the business for the next stage.Medikabazaar, backed by growth investors like Creaegis, CDC group and Lighthouse, has raised close to $200 million since inception in 2014.
“The board is identifying a new chief executive and should be finalised in a couple of weeks,” a person aware of the matter said. “There are other senior roles for which hiring has also been made, including that of former Jet Airways CFO Ravishankar Gopalakrishnan.” Gopalakrishnan joined the company in April as group chief operating officer and whole-time director.
Tiwari founded Medikabazaar in 2014 along with Ketan Malkan. Malkan was the company’s chief financial officer until July last year. Since then he has transitioned to a board role. Malkan was replaced by Raman Chawla – former top finance executive at companies such as Campus Activewear and Reckitt Benckiser – as Medikabazaar’s chief financial officer.
In May this year, Gopalakrishnan and Chawla were appointed on the board of directors of the company, according to information sourced from the corporate affairs ministry.
The other directors on Medikabazaar’s board are representatives of the company’s investors Creaegis, Ackermans & van Haaren and HealthQuad.
Medikabazaar’s spokesperson said the company has sufficient funds for its growth plans and remains focused on delivering services to its customers.
“The changes have largely been triggered by the board and investors. A similar executive reshuffle took place in Third Wave Coffee recently–where Creaegis is an investor,” one of the sources said.
People aware of the developments at Medikabazaar said one of the key misreporting in the company’s financials was how it identified its operating revenue.
“For a marketplace, revenue is the commission it makes on each sale. This and other discrepancies were found and are being fixed right now. The audit report is being finalised and would be submitted to the board and investors soon,” another person aware of the matter said.
B2B under review
Over the past year, several venture-funded startups have seen new audits being mandated by existing or new investors planning to infuse capital. This has revealed several instances of wrong accounting practices among startups, leading to companies being asked by investors to shut certain businesses.
ET had reported last October that investors like Tiger Global and Alpha Wave Global mandated auditing firm Deloitte to “work with” portfolio company Groyyo, a B2B manufacturing and supply chain enablement firm, to review its trading business and eventually close it.
B2B businesses or verticals within a company have come under severe scrutiny.
Grocery selling platform Dealshare, too, was asked to shut its B2B trading business by investors. Similar changes happened in startups like Zilingo, BharatPe, Trell and Mojocare. The nature and scale of changes vary.
“This is very serious now and people are wary of touching such B2B businesses. Even if someone is looking to invest, the diligence is much deeper now,” an industry source said.