Reams of paper have been used to write in media about the business acumen of Sachin Bansal one of the founders of India’s startup success story – Flipkart. Most of it, I must admit, is true.
Sachin has undoubtedly carved a niche for himself in India’s startup story and has also inspired many startup entrepreneurs in India and across the world to take a plunge into the world of entrepreneurship.
So when Flipkart co-founder and former CEO Sachin Bansal has reportedly acquired DHFL General Insurance from Wadhawan Group Capital (WGC) for around Rs 100 crore. Though the deal is seen as a distress sale for Kapil Wadhawan-led financial services group, which used to run the debt-laden DHFL, it left me perplexed and rather disappointed; because companies linked to Kapil Wadhawan or Dheeraj Wadhawan will undoubtedly have a checkered past, present, and future. That is a fact. It is the reason that the Wadhwans are in jail.
The deal has been done via Navi Technologies, formerly known as BAC Acquisitions which Bansal had founded along with IIT-Delhi batchmate Ankit Agarwal after selling his stake in Flipkart in 2018.
Within three months of acquiring DHFL General Insurance from Wadhawan Global Capital (WGC), Sachin Bansal took the existing brand CoCo and placed it under Navi General Insurance. As it used to do under DHFL, CoCo continues to offer insurance policies across health, motor, travel, and home, among others.
Following the already existing money trails of Kapil and Dheeraj Wadhawan and the complaint it received on July 27, 2020, CoCo has now come under the watchful radar of the Enforcement Directorate of India.
ED has reportedly opened a file and will be looking into a complaint filed by a whistleblower on July 27, 2020, over the detailed description of financial irregularities and money-laundering accusations leveled in the letter of the complainant. The letter was sent and received by the Joint Director, Enforcement Directorate.
No staff but pay staff
In a paragraph of the complaint letter, the complainant reveals the following startling accusations:
“Issues were noticed with two other sub-companies of DHFL with whom CoCo did business or made payments to whose transactions were questionable. However, the most alarming was observed with a sub-company of DHFL called DSSL. These were bills were of some employees under DSSL that supposedly worked for us in Sales at DHFL Home loans. The wage bill payout was far greater than-payouts for COCO’s own employee wage. Then they presented bills on incentives for this same population. At this juncture, I demanded contract papers with DSSL which strangely nobody was willing to share. Next, I received Training bills of an astronomical figure and the bill looked weak like it wasn’t real at all. I began an independent investigation and started talking to people at DHFL Home loans to discover DSSL was actually a company owned by DHFL Home loans.”
“The DSSL matter went from bad to worse. The CFO and some folks at DHFL came with new information to share, that this company now has 3 people in management so it’s not bogus. I was made to sign again. This time I found out these 3 people were actually employees of DHFL parked under DSSL only superficially. I was objecting still as I could not see the names and details of the so-called 1,500 to 2,000 feet of street sales team these crores were being paid for. Next, they came up with an excel sheet with names, ID, salary accounts, etc stating they are real people here on. Supposedly employed by DHFL home loans but we will say they also work for us ( pls note we had no products to sell that were retail. All were being filed and waiting for approvals so there is no question of employment for sales in volume ). Such billing continued till Nov 2019 and may have continued even after I stopped reporting to work.
Fictitious invoices, Fraudulent Invoices
In another paragraph of the complaint letter, the complainant states, “IDIT is a software bought by this company that’s been written off by other companies long ago. The CEO, Digital Head and IT Head went to Israel to buy a product from this obscure vendor. It is interesting to note this is not the only obnoxious or superfluous IT product purchased here. There is a string of such unexplained investments made that make sense for a giant insurance firm, not a budding one with a limited business scope at the time. Of the 190 crores Kapil Wadhawan invested almost 90 crores was spent on IT & it’s products.”
The complainant further tells ED, “When I objected to the company about its email security product violating employee privacy norms of India I ended in a ganged combat. The IT Head and CEO were forcing all employees to download on their personal phones and give it permission to delete apps on your phone which meant it will have access to applications private to you.”
“Via some real Wadhawan group capital companies or realty firms, there was overbilling as well. Such as rent paid to DHFL House. It was an astronomical rent we were paying. I questioned this choice too and got a flat response from the CEO & CFO that it was Kapil moving money from one pocket to the other. Overbilling in Dish Hospitality – a food catering company was another potential overbilling item,” the complainant states in the letter to ED.
Debt-ridden but not clean
Reportedly the due diligence of DHFL General Insurance and CoCo was done by Navi Technologies in Oct 2019. It was closed in December 2019.
The complainant in the letter to ED also states that Sachin Bansal was made aware of the financial irregularities and money-laundering activities in CoCo.
I can understand that in business sometimes it makes good sense to buy a debt-ridden company but I am finding it difficult to comprehend that Sachin Bansal would overlook gross financial violations and money-laundering activities of CoCo in light of the fact that the Wadhawan companies were and are under the scrutiny of the investigative agencies.
Sachin Bansal is yet to reply to my questions on his acquisition of DHFL General Insurance and ED complaint filed on CoCo financial irregularities and money-laundering.
