PC: The Economic Times
ReshaMandi, once touted as a nimble player in the textile supply chain space, is now beset with profound operational hiccups. The company reportedly laid off its entire workforce; its website has not been functional for more than a week. This rowdy period comes amid the resignation of its auditor, Walker Chandiok & Co LLP, indicating major internal and financial problems.
Sources close to ReshaMandi have revealed that the firm is unable to service its financial obligations, including operational costs and salary payouts to employees. It also seems like issues concerning its corporate governance, revenue inflation and the use of fake invoices, are at play. Matters also seem to have been worsened by the resignation of the auditor last month over concerns noted in regulatory filings accessed from the Registrar of Companies.
Finally, Saurabh Kumar Agarwal, Chief Technology Officer and founder of ReshaMandi, admitted to the company’s financial struggles. According to him, reduction of operations and staff is part of their effort at managing the crisis. The firm cannot support the audit firm in its efforts to complete the financial statements for FY23 and also has Rs 14.16 lakh pending with the auditing firm against its services.
On the auditor’s resignation, Reshamandi appointed Suresh Kapoor & Associates as its new auditor in late July. But the company has also seen instability at the level of its financial leadership due to the resignation of its chief financial officers. The most recent one was Samadrita Chakravarty, who joined in April 2023 and resigned in October of the very same year.
According to the spokesperson of ReshaMandi, pending receivables realization and operational streamlining will help the firm sail through the financial crisis, and he is quite optimistic about its recovery to bounce back to normalcy.
It is surprising that Reshamandi is facing financial trouble, more so after its earlier strong revenue growth claims. The company had raised more than $50 million, of which the $30 million Series A round was in October 2021, and it was reportedly in fund-raising talks for another $5 million to pay the dues of pending salaries of employees. This did not bear fruit, and now the company is in a precarious position.
The meteoric rise and fall of this event has taught a sour lesson to startups: that the growth and valuation are above proper business practices. The step-back decision from potential investor Temasek will underline the perils of aggressive expansion strategies.
In a nutshell, the ReshaMandi case very appropriately brings forth the requirement for professional financial management and corporate governance in the running of business enterprises. The future growth and survival of the company depend on how best it manages to set its internal house in order and regain investors’ confidence during this troubled time.
