Medikabazaar, an India- based B2B healthcare supply chain startup, has removed its founder and former CEO, Vivek Tiwari, from its board after a financial fraud investigation.

Tiwari was found to have engaged in “malicious and fraudulent activities,” including misuse of company funds and negligence.

The investigation revealed that Medikabazaar’s FY23 revenue was overstated by over 50%, primarily due to inflated gross merchandise value, with the reported revenue of US$181 million nearly double the actual figure.

Tiwari, who stepped down as CEO in 2024, has been replaced by Dinesh Lodha, the former country head of Samsung India.

🔗 Source: Inc42

🧠 Food for thought

1️⃣ Pattern of financial misconduct in Indian startups highlights governance crisis

Medikabazaar joins a growing list of Indian startups caught in financial reporting scandals, raising serious concerns about governance standards in the ecosystem.

Earlier cases include GoMechanic, which admitted to financial misreporting during a due diligence process, leading to layoffs of 70% of its workforce as part of restructuring efforts 1.

Similar allegations have plagued other high-profile startups like BharatPe and Zilingo, creating a troubling pattern that has prompted major investors like Sequoia Capital to express concern about governance practices 1.

The trend is particularly alarming considering that over 90% of Indian startups already fail within five years, with 77% of venture capitalists believing many lack unique business models or innovation 2.

These recurring scandals reflect systemic issues rather than isolated incidents, with complex ownership structures, ineffective independent directors, and inadequate disclosures emerging as common factors in corporate governance failures 3.

2️⃣ Valuation pressure drives financial manipulation in growth-focused startups

Medikabazaar’s case illustrates how the pursuit of high valuations can incentivize financial manipulation, especially in companies that have raised substantial funding.

The company raised $194 million and achieved a $650 million valuation in 2022, creating immense pressure to demonstrate revenue growth that would justify such valuations 4.

This pressure appears to have contributed to the systematic inflation of revenue figures, with PwC’s audit revealing that FY23 revenue was overstated by more than 50% through inflated gross merchandise value reporting 5.