Less than a year after receiving $20.6 million in its Series A financing, the Bengaluru-based company’s financial problems, which include overstating revenues, have come to light.
According to the company’s primary investors, financial issues have been found at the healthtech startup Mojocare. The Bengaluru-based healthcare company inflated sales bills and misrepresented revenues in order to achieve its objectives. An Indian startup looks to have failed corporate governance yet again in this case. The issue at Mojocare is a repeat of what happened at GoMechanic, when the owners admitted to being impatient and fabricating their books in order to show higher sales figures.
In a similar vein, a few other firms, including Rahul Yadav’s second startup, Broker Network (4B Networks), Trell, Zilingo, and BharatPe, have acknowledged a few further financial irregularities in the last year or so.
According to insiders, Deloitte has been hired by Mojocare’s primary investors, who include Chiratae Ventures, B Capital, Better Capital, and numerous others, to conduct a forensic audit. The process has been underway for the past one to two months.
“The founders of Mojocare have admitted to investors that they exaggerated sales in order to meet revenue targets and demands. Investors are not currently considering taking legal action because there is no proof that monies have been syphoned off, according to those in the know about the situation.
The developments were confirmed by investors in a joint statement released on June 18.
“Major Mojocare shareholders requested a study of the company’s financial records. Initial investigations have shown financial irregularities while the analysis is still in progress, and it is now clear that the business model is unsustainable owing to a number of operational and market problems. Mojocare will consequently be reducing back activities, and the investor group is assisting the business during this transition, it added.
There are no hidden options.
Investors and the creators of Mojocare, Rajat G and Ashwin S, are currently looking into all possibilities to save the business, including a sale, a merger, or even a total shutdown.
Mojocare still retains between 60 and 80 percent of the $20.6 million it raised in July 2022 in case it needs to cease operations.
Another individual with knowledge of the situation said, “Investors and founders are currently considering a sale of Mojocare’s assets which will enable the company return about 50–60 percent of the capital it raised last year. They also said that some of the leftover funds would be utilised to pay employees’ severance.” To move forward, Mojocare is closely collaborating with its investors. We strongly refute any claims that money was stolen from the business. We are constantly determining what is best for the company with our investors, a Mojocare representative stated in a statement.
Lowering costs exercise
According to a person familiar with the inner workings of the company, Mojocare, which provides individualised medical treatment for issues related to sexual wellness, women’s wellness, mental wellness, and hair loss, has already let go of about 200 employees and is now down to just 40 employees.
The creators of the company acknowledged during its fundraising that the area they were developing in was already occupied, but they gambled on their unique strategy, which has not produced the intended outcomes. However, the corporation claimed that about 150–170 persons were actually impacted.
“…Despite our best efforts, during the past few months, our business fundamentals haven’t worked out. We have made the decision to rationalise costs in order to increase capital efficiency. We must return to working as a small but capable team in order to put profitability and sustainability first, allowing us to decide what’s best for the business moving ahead,” the company representative stated.
According to Tracxn, the most recent statistics showed that while Mojocare’s revenue increased from Rs 30 lakh in FY21 to Rs 12.1 crore in FY22, its losses increased at the same time from Rs 1.1 crore to Rs 5.5 crore.
According to information seen on Tracxn, Mojocare, which was established during the pandemic by a former Chiratae Ventures employee, has raised roughly $24 million so far and has a valuation of about $68 million.
According to Tracxn statistics, Mojocare’s founders Rajat G and Ashwin S hold around 48 percent of the company, while Chiratae had a 14 percent ownership stake. According to data, B Capital owned about 10% of Mojocare, with the remaining 90% owned by other investors.
Peak XV Partners (formerly known as Sequoia Capital India) is another investor in the health and wellness firm along with Chiratae Ventures, B Capital, and Better Capital.
