Dailyhunt Says No Material Lapses After Auditor Deloitte Flags Issues

“The financials are true and fair with a clean report. The controls within the company were identified as weak by Deloitte, however, it is confirmed that these control weaknesses have no impact on the company’s consolidated financial statements,” VerSe Innovation cofounder Umang Bedi told Inc42.

This comes as Bengaluru-based VerSe Innovation, the parent company of DailyHunt and Josh, saw its auditor Deloitte flagging weaknesses in its internal financial controls in its audit report for the financial year ending March 2024 (FY24).

The audit highlighted several gaps in VerSe Innovation’s internal processes, including supplier selection, expense provision, revenue recognition, handling of virtual assets, and IT systems control.

Notably, for FY24, the company saw its operating revenue decline 8.8% to INR 954.7 Cr from INR 1,046.8 Cr in the previous fiscal year. Meanwhile, its net loss for the year under review narrowed more than 56% to INR 814.8 Cr from INR 1,878.4 Cr in FY23.

Bedi further claimed that the loss halved in FY25 as well. (More on Dailyhunt’s claims for FY25 later.)

What’s The Deloitte Issue At Dailyhunt?

In its report, VerSe Innovation’s auditor Deloitte said the company did not have proper controls while selecting vendors, approving purchase orders, or making payments.

This, according to Deloitte, could lead to wrong payments, overpayments, or even fraud. For instance, when the auditor asked for a confirmation of all pending payments as of March 31, 2024, a vendor included certain invoice numbers linked to INR 35 Cr amount.

However, when VerSe Innovation checked its internal records, it found that it never received the said invoices. According to VerSe Innovation, the invoice numbers appeared to be from FY22, not the fiscal year under review. This was not a standalone issue.

Here were the additional points raised by Deloitte:

• The auditor said that the company had poor controls over buying, selling, and managing virtual assets. This created risks of revenue misreporting or even asset theft. Notably, the company operates and maintains mobile platforms whereby users can access live-stream content provided by the live streamers and interact with the streamers on a real-time basis. The sale of such content comes under virtual assets.
• Further, the auditor said that VerSe’s method for recording all expenses by the financial year-end was weak, which could cause errors in reported costs.
• Deloitte said that VerSe Innovation’s controls for recording advertising revenues were not working effectively. Some campaigns were not properly documented with client approvals, risking wrong revenue reporting.

“…campaigns were not operating effectively which could potentially result in the misstatement in the recorded amount of advertisement revenue and trade receivables,” Deloitte said in its report.

The auditor also said that due to the complexity of VerSe Innovation’s business, acting as a publisher, ad platform, and aggregator across many partners, it struggled with correctly applying revenue recognition rules under Indian accounting standards.

It is pertinent to note that besides news aggregator Dailyhunt and short video platform, VerSe Innovation also operates digital marketing solutions firm Valueleaf, news subscription platform Magzter, among others.

VerSe Innovation admitted the issues flagged by the auditor and said it is taking steps to strengthen internal controls, including process workshops, new documentation frameworks, and updated IT access protocols.

“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,” Bedi told Inc42.

“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. We are fully committed to strengthening our internal controls and remain confident in our plan to achieve break-even in the second half of this fiscal year,” he further said.

However, VerSe Innovation will be replacing its auditor going forward. PwC will now audit VerSe Innovation’s financial statements.

Bold Breakeven Target

Bedi also told Inc42 that the company saw about 70% increase in its operating revenue in FY25 (about INR 1,622 Cr). He claimed that the company halved its net loss for FY25 as well to around INR 400 Cr, and expects to break even by mid-FY26.

For FY24, VerSe’s total expenses declined by 37.6% to INR 1,970.9 Cr from INR 3,156.4 Cr in the previous fiscal. Notably, the company’s employee benefit expenses for FY24 reduced 41.8% to INR 443.1 Cr from INR 761.1 Cr in the previous fiscal year.

Bedi attributed this decline to reduction in its share-based expenses to INR 178 Cr from INR 460 Cr in FY23. Meanwhile, in the past year, the company has acquired several new businesses.

For instance, in April 2024, VerSe bought New York-based digital newsstand platform Magzter. It also acquired Bengaluru-based adtech company Valueleaf Services, which is likely to have been a major contributor to its revenue growth in FY25.

Additionally, the company launched NexVerse.ai to provide AI-based solutions for brands and advertisers through performance marketing tools.