Medikabazaar ousts former CEO Vivek Tiwari over fraud allegations

B2B medical supply chain platform Medikabazaar has removed its director and former CEO, Vivek Tiwari, from the company over allegations of malicious and fraudulent activities.

The shareholders of the company have passed a resolution to remove Tiwari from the board of directors for doing fraudulent actions, its regulatory filing accessed from the Registrar of Companies (RoC) shows.

“Mr. Vivek Tiwari is involved in malicious and fraudulent activities, including those of financial mismanagement and financial fraud, which have caused irreparable harm and damage, and are alarming to the well-being of the company," the filing stated.

Uniqus India, Alvarez & Marsal, and M/s Rashmikant & Partners conducted the investigation and concluded that he had breached fiduciary duty and was guilty of gross negligence, misappropriation, and misstatements, the filing further stated.

According to PwC auditors, inconsistencies in revenue recognition and multiple governance issues led to the removal of Vivek Tiwari from his role as Chief Executive Officer of the company last year.

“I categorically deny all allegations of fraudulent conduct or intentional misrepresentation during my tenure as CEO. The claims suggesting my involvement in any alleged inflation of revenue figures are misleading, and do not reflect the reality of the situation... While the current narrative is unfortunate and deeply damaging, I remain confident in the truth. In the coming days, true facts will emerge, providing clarity and reaffirming my personal reputation and integrity,” said Tiwari in an email response to Entrackr on Friday (April 18).

Medikabazaar has secured over $190 million in total funding across multiple rounds. This includes a $65 million Series D round in 2022, led by Lighthouse India, which valued the company at $700 million. According to startup data intelligence platform TheKredible, Craegis holds the largest external stake in the company, followed by Rebright Partners and HealthQuad. Co-founders Vivek Tiwari and Ketan Malkan own 12.36% and 12.35% of the company, respectively.

Medikabazaar has not yet filed its annual report for the fiscal year ending March 2024. In FY23, the company reported revenue of Rs 908 crore and a net loss of Rs 304 crore. Notably, its Series C investors have raised an indemnity claim of Rs 278.7 crore, alleging misreporting in prior financial periods.

The ongoing saga at listed Gensol Engineering and its promoters' financial shenanigans through their unlisted firms, and now Medikabazaar’s travails, indicate how much every such criminal behaviour impacts the ecosystem. The ‘checks and balances’ investors are forced to bring in after such instances will only make honest founders wince, as they handle another distraction from their core focus of building the business. This poisoning of the well will drive investors to institute strong checks and balances to prevent promoter fraud. It is unfortunate that every such instance makes it more difficult to disagree.

One can only add that the rot, when it is right at the top in these cases, is not limited to it, but well spread out to enable it to happen so brazenly. That brings in larger issues of our approach to ethics and moral hazards in India, something that is regularly ignored by startups as they chase growth in ‘good faith’. Or in the hope that shortcuts and lapses in judgement can all be covered up if success touches them. It’s an approach blamed on the wider environment including engagement with the multiple authorities and suppliers, or even Startups that have ‘made it’. But what it does is indicate just how far the country has to travel to achieve a trust based system built around voluntary compliance with the law and quick justice in case of planned aberrations. Not only will that  attract more investors, it also speeds up processes across the board that can only benefit everyone involved in the long term.