Dailyhunt parent VerSe’s internal controls inadequate, says Deloitte audit

VerSe Innovation’s auditor, Deloitte, has flagged issues in the internal controls of the parent of Dailyhunt and Josh for the financial year ended March 31, 2024, stating that these "material weaknesses" could potentially lead to misstatement in accounting aspects including operating expenses, trade payables and expense account balances. Deloitte’s findings are part of the unlisted company’s financial statement for fiscal 2024.

In the filing made with the Registrar of Companies, the audit firm said VerSe did not have appropriate internal controls over the selection and evaluation of suppliers, approval of purchase orders and invoices, as well as payments.

The Bengaluru-based VerSe Innovation, which has raised over $2 billion in funds since being founded, is backed by the likes of Canada Pension Plan Investment Board (CPPIB), Ontario Teachers' Pension Fund, James Murdoch's private investment firm Lupa Systems, Z47 (formerly Matrix Partners) . It last raised $805 million in a funding round led by CPPIB in 2022, valuing it at nearly $5 billion.

VerSe lacked appropriate internal controls to review the completeness of expense provisions at each reporting date, the auditor said.

In response to the auditor’s remarks, VerSe said the company was strengthening its processes by conducting a “detailed workshop on the best practices and checklists” that would be followed by all the relevant personnel. The company said it would create an “end-to-end order to cash process via a well-documented framework encapsulating supplier selection, approval process, invoicing and payments as per the DOA (delegation of authority)”.

In its audit report, Deloitte has also said that these material weaknesses do not impact their opinion on the consolidated financials.

In a statement, VerSe said, "Deloitte, VerSe Innovation’s long-term auditor, has issued a true and fair view of our FY24 consolidated financial statements, providing a clean audit opinion on our financials. While Deloitte identified certain internal control weaknesses, their report has clearly confirmed that these do not impact their opinion on the consolidated financial statements which is true and fair". It added that it was committed to strengthening internal controls and plans to achieve break-even in the second half of ongoing fiscal.

The auditor also stated that while it was issuing an adverse opinion on VerSe’s internal controls, its opinion on the financial statements was unqualified.

Deloitte highlighted changes in the figures reported for the year ended March 31, 2023, and flagged an unsubstantiated claim of Rs 35 crore connected to unexplained invoices from a supplier which the company has not recognised as a trade payable.

According to the company, the restatement in revenues for FY23 was because of adjustments on account of Indian Accounting Standards (Ind-AS).

The company’s chief financial officer Sandip Basu had stepped down recently because of health issues, Mint had reported on April 23.

Financials for fiscal 2024

Operating revenue for FY24 was fell to Rs 1,029 crore from Rs 1,104 crore in FY23, according to the latest filing. It had earlier reported Rs 1,457 crore in operating revenue for FY23, but has now restated the number.

Net loss at Rs 889 crore in FY24 fell 54% from the previous year.

Total expenses fell to Rs 2,148 crore from Rs 3,263 crore. The company spent Rs 1,154 crore on cost of materials consumed, Rs 502 crore on employee benefits and incurring other expenses of Rs 418 crore.

Deloitte said it did not audit the financial statements of eight subsidiaries, whose financial statements reflect total revenue of Rs 793 crore in FY24.

“These financial statements have been audited by other auditors whose reports have been furnished to us by the management,” it said.

Last year the company acquired digital marketing solutions firm Valueleaf Group in a cash-and-stock transaction. It has acquired several companies, including New York-based digital magazine store Magzter, to enhance its portfolio with premium English language content.

Verse was founded by Virendra Gupta with former Facebook India managing director Umang Bedi joining in as president in 2018. Bedi was designated as a cofounder subsequently.

It competes with online news aggregator InShorts, which posted a net loss of Rs 228 crore in the year ended March 2024, 26% lower than the year before, while its operating revenue stood nearly unchanged at Rs 181 crore.