Companies
Reshamandi’s financial crisis deepens with frozen accounts and legal battles
Summary
- Agritech startup Reshamandi's financial crisis has escalated, resulting in the freezing of its bank accounts. The company is struggling with debt repayment and clearing employee salaries.
BENGALURU : Sometime early last year, agritech startup Reshamandi was riding the funding boom, churning revenues, and eyeing net profitability and expansion. Today, the Bengaluru-based firm finds itself ensnared in a financial crisis, with frozen bank accounts, delayed debt repayments, and mounting legal challenges threatening its survival.
The company, a business-to-business marketplace for silk products, has been struggling with delayed debt repayments amid difficulty in raising funding since the middle of last year, characteristic of the struggles in the wider agritech sector.
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As of August last year, Reshamandi had delayed repaying dues of over $36 million by 30-40 days, according to reports.
This financial strain has now culminated in the freezing of its bank accounts, according to people aware of the development.
"We are actively resolving the delays. These take time," the company said in response to Mint’s queries regarding the frozen accounts, adding that discussions with bankers on debt are underway.
Documents accessed by Mint also reveal that debt investors Northern Arc Capital and Aditya Birla Finance Ltd have approached the National Company Law Tribunal (NCLT) against Reshamandi.
The company, founded in 2020 by Mayank Tiwari, Saurabh Agarwal, Utkarsh Apoorva, has raised approximately $70 million in capital from investors such as Omnivore, Innoven Capital, Alteria Capital, and Northern Arc.
According to data platform Tracxn, Reshamandi raised its last funding round of $5.6 million in June last year, at a valuation of $74 million.
Reshamandi’s revenue increased to ₹414 crore in FY22 from ₹21 crore in FY21. However, its losses widened from ₹2 crore to ₹59 crore during the same period. The company is yet to file FY23 numbers.
Impact on employee salaries
The financial turmoil has not only affected debt repayments but also employee salaries. Reshamandi has failed to pay a significant number of its employees and has not deposited provident fund money since August.
In a town hall meeting in June, chief executive Mayank Tiwari had informed employees that salaries would not be paid for the next three months, urging those who wished to leave to do so, according to two former employees.
Adding to the controversy, the company asked some employees to sign new offer letters from an entity called GENZR, the nature of which remains unclear and has not been addressed by the company.
Salaries for some employees were cleared through GENZR’s account, with pending salaries from Reshamandi listed as a joining bonus in GENZR. This move prompted some employees to file police complaints, leading to the eventual clearance of their salaries.
Mint has seen copies of the GENZR appointment letters and the police complaints.
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“Most of the employees who stayed with the company were on paper working under the entity named GENZR and now they have also been asked to resign," said one of the former employees cited above.
Responding to a detailed questionnaire on defaults, salary payments, GENZR, and funding issues, the company said, “The first few quarters of 2023 saw tremendous growth for us where our revenue was 3x! However, we started to face some challenges which are a normal course of business for a company in our space, i.e., collections from our retailers and the funding winter which impacted almost every startup in the ecosystem in one way or the other."
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The company emphasized that these challenges have not affected their determination to continue operations. Due to the financial crunch, Reshamandi said that they had to make difficult decisions to keep the company afloat, ensuring they acted in the best interest of the company and upheld their fiduciary responsibility towards shareholders, board members, and lenders.
Reshamandi also clarified that there are no corporate governance issues or plans for restructuring. “We continue to stand our ground in bringing the company back to its shape and form and scaling further," it asserted.
India's agritech landscape
The broader landscape for agritech startups in India remains challenging.
A 2023 AgriFoodTech Investment report by AgFunder and Omnivore highlighted a 33% drop in venture capital funding for agritech and food-tech startups in 2022, with total funding falling to $2.4 billion.
Much of the sector’s investment has relied on government support amid stringent official controls.
India's agritech sector, valued at an estimated $24 billion, remains significantly untapped with only 1.5% penetration, according to a report by Ernst & Young.
The sector has yet to see a startup achieve unicorn status or a public listing. Notable players include the likes of DeHaat, WayCool, and Ninjacart are valued between $650 million and $800 million.
