Infibeam Avenues, Indias first listed ecommerce company is not new to corporate governance concerns. In September 2018, a WhatsApp message had destroyed 70 percent of company's market capitalisation in a day, which was the steepest single-day fall in any company shares since Satyam which crashed 83 percent in January 2009.

Then in January 2019, reports suggested its auditor SRBC & Co LLP, the audit arm of EY India, sought a detailed report of a probe into its merger with payment gateway – Avenues India Pvt Ltd – and now again auditors have raised some red flag.

Auditor says the company has given advances aggregating to Rs 122.3 crore to subsidiary companies as of December 31, 2018. These advances had further been given by these subsidiary companies to various vendors for different projects.

The auditor pending more information from the management is unable to comment on the appropriateness of terms of entering the transaction including the selection of vendors by subsidiary companies and hence cannot comment on the recoverability of advances and consequential impact.

There was no mention of such advances given to subsidiary companies by the auditor in the September and June quarter results, however, from the annual report of 2018, the company has been giving interest-free unsecured loans to its wholly-owned subsidiary (WoS) NSI Infinium Global since inception. So it is unclear if this is another instance in a series of transactions or a fresh development.

In the third quarter financials, the company has accounted for revenue from web development and maintenance services amounting to Rs 32 crore which includes revenue which was pending recognition in the quarters ended June 30, 2018, and September 30, 2018.

The auditors highlighted that web development and maintenance services are customised/specialised in nature and therefore comparable market price for arriving at the basis of the price charged to customers s not available. Hence the auditors were unable to comment on the appropriateness of the measurement of revenue and its impact if any, on results.

First Published:Feb 15, 2019 12:55 PM IST