Deloitte flags serious internal control weaknesses at VerSe Innovation, parent of Dailyhunt and Josh. Know what went wrong, how it impacts VerSe’s IPO plans, and the broader Indian startup ecosystem.
Deloitte Flags Major Lapses in VerSe Innovation Internal Controls
Audit giant Deloitte has flagged several serious lapses in the internal financial controls of VerSe Innovation, the parent company of popular platforms like Dailyhunt and Josh. The findings, disclosed in recent filings with the Ministry of Corporate Affairs, once again highlight the governance gaps that seem to be plaguing India’s growing tech startup ecosystem.
Procurement and Payment Processes Under Scanner
As per Deloitte’s report, VerSe lacked proper internal controls over critical processes like supplier selection, purchase approvals, and invoice payments.
Impact on Financial Reporting
While such gaps might appear operational at first glance, in reality, they can lead to misstatements in expenses, inflated trade payables, and even instances of preferential treatment or financial misappropriation. In a startup handling large vendor networks and payment cycles, these are serious risks.
Concerns Over Handling of Virtual Assets
More troubling were Deloitte’s observations around VerSe’s management of digital assets. Weaknesses were flagged in customer onboarding, asset pricing, segregation of duties, and user access for digital asset transfers.
Why Virtual Asset Controls Matter
In today’s economy where digital currencies and assets are becoming integral, any lapse in managing these carefully can distort revenue recognition and open the company to fraud risks.
Financial Statements Still “True and Fair” Despite Gaps
Interestingly, despite the flagged weaknesses, Deloitte issued a “True and Fair” opinion on VerSe’s standalone financial statements for FY24. In plain terms, this means the numbers shared publicly still reflect the company’s actual financial situation though internally, better processes are needed.
Timing Raises Eyebrows: CFO Resigns
Adding to the concerns is the recent resignation of VerSe’s Chief Financial Officer, Sandip Basu. Although no direct link to the audit findings has been made public, the timing is notable and does little to ease stakeholder nerves.
Revenue Recognition and IT System Weaknesses
Apart from procurement and virtual asset handling, Deloitte also flagged:
- Ineffective controls over customer release orders for advertisement revenue.
- Weak IT general controls like user access management, program development, and missing audit logs.
₹35 Crore Invoice Dispute
Perhaps the most serious observation was an unexplained ₹35 crore claim related to supplier invoices a liability VerSe has yet to acknowledge formally.
VerSe Innovation Financial Health: Some Progress, Some Worry
Financially, VerSe reported ₹1,029 crore in operational revenue in FY24, a slight drop from ₹1,104 crore the previous year. However, the company managed to reduce its net loss sharply to ₹889 crore from ₹1,909.7 crore in FY23.
IPO Dreams Amidst Governance Challenges
While VerSe’s improved loss figures show operational strictness, its IPO ambitions could be impacted if internal control gaps are not going to closed soon.
Read also: India Strengthens Naval Aviation
Indian Startup Ecosystem Under Scrutiny
VerSe innovation is not alone. Other Indian startups like Medikabazaar, Bizongo, and Gensol Engineering have also come under audit and governance-related scrutiny recently. As Indian startups mature, strong internal processes are no longer a luxury. But they are essential for survival and growth.
Medikabazaar removed its former CEO Vivek Tiwari from the board over allegations of financial misreporting and misappropriation is one of many corporate misgovernance among Indian startups who do things wrong behind company’s back, reported by Moneycontrol.
Conclusion
VerSe Innovation case serves as a reminder as scaling fast is important, but maintaining solid governance is even more critical.
Without strong internal systems, no amount of funding or valuation can protect a company’s future.
