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Troubled Mojocare Nears Judgement Day; Investor Refunds On The Cards

As of June 2023, the healthtech startup had around $12 Mn (INR 100 Cr) in its account

In May, cofounders Ashwin Swaminathan and Rajat Gupta admitted before that board that they fudged numbers, created fake invoices and inflated revenue

Mojocare has once again brought to the fore the dilapidated state of governance guardrails among Indian startups

Troubled healthtech startup Mojocare’s board has finalised plans to shut down operations and return remaining capital to investors. 

Sources told The Economic Times that a resolution was finalised by shareholders at the company’s board meeting earlier this month. As per the report, the remaining capital would be returned to the shareholders fully after resolving certain outstanding vendor payments. 

A group of investors is in talks with vendors to settle the matter. The healthtech startup was said to have around $12 Mn (INR 100 Cr) in its bank account as of June, a person familiar with the development told ET. 

In a major controversy that erupted earlier this year, Mojocare’s founders admitted before the board that they inflated revenues and fudged other numbers during internal presentations. 

Founded in 2020 by ex-Chiratae executive Ashwin Swaminathan and former Mobile Premier League vice-president Rajat Gupta, Mojocare is a digital wellness platform that operates in areas such as sexual wellness, women’s wellness, mental wellness and hair loss. 

Mojocare Implodes 

Mojocare raised $20.6 Mn (INR 160 Cr) as part of its Series A funding round led by B Capital in August 2022 amid deepening funding winter. 

As all major angel investors in the country, from CRED CEO Kunal Shah to Curefoods’ Ankit Nagori, lined up to invest in the startup, all eyes were on Mojocare as to how it would scale up in a space over-populated by startups such as Misters, Good Health Company, Sirona, Mosaic Wellness, and BoldCare. 

Despite the intense competition, Mojocare saw an explosive 38X year-on-year (YoY) revenue growth to INR 12.12 Cr in FY22 compared to a mere INR 32 Lakh in FY21. During the same period, total expenditure soared from INR 1.83 Cr in FY21 to INR 19.46 Cr in FY22, resulting in a net loss of INR 5.5 Cr in the year ended March 2022 compared to INR 1.1 Cr in FY21.

It is on the back of these numbers, including the connections of founders within the startup ecosystem, that helped Mojocare a big-ticket funding round last year. However, it was a previous audit undertaken into the company’s finances by Deloitte that uncovered the misreporting of revenues. 

Subsequently, in May 2023, the two cofounders confessed before the board that they doctored numbers by indulging in round-tripping of funds via inventory sold to relatives, creating fake invoices and inflating revenue. Eventually, both the founders were directed to step down, and a new CFO took over the reins of the company. 

In July, it was reported that a clutch of investors were mulling a fire sale while others were looking at shutting down the company and returning the capital. It seems that the board has sided with the latter. Besides, the financial forensic report by Deloitte also found that both Gupta and Swaminathan allegedly misled investors and the board by inflating revenue.

Mojocare has once again brought to the fore the dilapidated state of governance among Indian startups. In the past year, a slew of startups including names such as GoMechanic, Trell, Zilingo, BharatPe and Rahul Yadav’s 4B Networks have also been embroiled in similar controversies, including misappropriation of funds. 

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