Mojocare's investors allege financial fraud, mull legal action, may shut down of business: Sources

Troubled health-tech startup Mojocare seems to have landed in thicker soup as its shareholders mull legal action against the founders after financial irregularities were unearthed at the company, CNBC-TV18 has learnt from sources.

Mojocare's investors may also look at a complete shuttering of its operations and distributing the remaining capital among themselves, sources added. The shareholder group has also alleged that the founders inflated Mojocare’s revenue.

The development comes a day after top investors Chiratae Ventures, B Capital and Peak XV Partners (earlier Sequoia Capital India), initiated a review into the operations of the company. The final report of the forensic audit that is being conducted by Deloitte is expected in 10 days.

The investors in a joint statement on Sunday had told CNBC-TV18, “While the analysis remains ongoing, initial findings have uncovered financial irregularities, and it has become apparent that the business model is not sustainable due to a variety of operational and market factors.” The statement added, “As a result, Mojocare will be scaling down operations, and the investor group is working with the company through its transition.”

The Bengaluru-headquartered startup that was founded in 2021, laid off 150-170 employees or 80 percent of its workforce on June 18, citing efforts to “rationalise cost and prioritise profitability”.

"Facing difficult market conditions, we at Mojocare have had to make tough decisions to improve our unit economics. Despite our best efforts, our business fundamentals have not worked out over the past few months. In order to become more capital efficient, we have decided to rationalise costs. In order to prioritise profitability and sustainability, we must revert to operating as a small yet robust team, allowing us to figure out what's best for the company going forward," a Mojocare spokesperson told CNBC-TV18.

As per sources, Chiratae is the largest investor in the company, B Capital has put in the most amount of money and Peak XV Partners via Surge was the last to come in as an investor.

Mojocare joins the list of Peak XV Partners startups facing allegations of misconduct, governance and auditing issues in the past one and a half years including GoMechanic, Zilingo, BharatPe and Trell.

The firm raised $20 million from B Capital, Chiratae Ventures, Peak XV Partners’ Surge and Better Capital last year. To date, it has bagged $23.7 million and was last valued at $67.1 million. As per a report by the Economic Times, Mojocare is estimated to still have about Rs 80-100 crore in the bank, even as its operations have come to a screeching halt.