“I can name at least four IPO-bound startups whose financials are delayed because the auditors are refusing to sign on their books, after discrepancies were found in their annual filings,” Sathya Pramod, who founded KayEss Square Consulting Pvt Ltd, told Inc42.

And this epitomises the new wave of corporate governance problems plaguing Indian startups.

Are Indian startups in the crosshairs? Not all of them, certainly, but a good number of tech startups have run into a rough patch with auditors and even whistleblowers flagging various irregularities, driving skeletons out of the closet.

The first four months of 2025 have seen multiple instances of financial misreporting, revenue inflation, corporate governance lapses, boardroom wars, and VCs dragging founders to courts. The most recent came up when Deloitte put a disclaimer on the delayed FY24 financial statement of VerSe Innovation that could possibly impact its standalone FY24 financials and not consolidated financials.

Although the Big Four auditor did sign the FY24 figures of the unicorn, it mentioned that the company’s internal controls were weak, there were concerns on revenue recognition, possible theft of assets, and so on. The standoff turned the spotlight back on how the new-age companies were struggling to keep their slates clean.

“Disclaimers in the financial statements won’t help,” Pramod said.

“We often see cases of accounting frauds and misreporting of financial figures. Will a disclaimer from the auditor do systemic cleaning? The answer is no.” said Pramod, who has spent more than 20 years in consulting while working for big names like Deloitte, EY, AOL, and Tally.

The issue escalated when Deloitte’s flagging of irregularities coincided with a churn in VerSe’s finance team, including the exit of its chief financial officer.

Unicorns Feel The Corporate Governance Heat

The dynamics of the industry can be observed best in late-stage startups, especially unicorns and soonicorns, that raise billions of dollars from venture capitalists (VC) both within and outside India.

When the lid was blown off their corporate governance gaps and lapses, flagship ventures came under the lens, such as BluSmart, BYJU’S, Dunzo, Log9. The downfall was foretold in many ways.

The collapse of the giants helped the younger startups learn their lessons hard. Founders realised that their internal controls, corporate governance practices and, of course, accounts would go under more intense scrutiny. But not many had the wherewithal to change things around.

Many large startups earned the ‘tainted’ tag in the past few months with their founders being chased by investigating agencies. Investors declared court wars and employees were laid off. The blame, in most cases, was put on the lower management.

Some analysts feel the frenetic rush of startups for listing on stock markets has been a major reason behind rampant fudging of numbers or averting transparent practices.

“There’s an unbridled pressure on IPO-bound startup founders and management to show profitability for floating their public issues. At times, they also resort to creative accounts dressing to clear the exit of long-term investors before the draft papers are filed for the IPO,” Pramod added.

As many as 13 new-age tech companies went listed on the bourses in 2024, mopping up INR 29,070 Cr. According to Inc42 data, 23 startups were in various stages of floating their IPOs at the start of 2025.

“It is basically a slowdown exposing the bad actors in the system,” Siddarth Pai, the founding partner and chief financial officer of early stage venture firm 3one4 Capital, told Inc42.

Pai, who is also part of the Executive Council of the Indian Venture Capital Association (IVCA), admitted that when there was free flow of capital in 2021, big and small companies and even the VCs almost ignored good governance and quality checks, and the growth story took over.

“We have reached a point where there is no more funding FOMO (colloquially, the fear of missing out). With ample liquidity in the market, speed was essential. But a slowdown exposes these defects as capital dries up and these issues are impossible to hide then,” he said.

From BYJU’S going bankrupt in 2022 to Ashneer Grover’s infamous removal as BharatPe MD and subsequent legal battle that lasted more than two years to GoMechanic cheating investors with inflated revenues in 2023 – a close look into tainted startup biggies reveals a pattern of how financial frauds,........

© Inc42